Martin v. Ball ( 2009 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 08-1757
ROBERT A. MARTIN; THOMAS D. MORGAN; RAY JACKSON MEADOWS;
CHARLIE CONNER; STEPHEN KING; EDWARD RIDER; CHARLES MOONEY;
JOHNNY BURGESS; ROGER LEGG; JEFFREY HILL; GREG WRIGHT;
AARON SPRADLING; CRAIG ERVIN; RONNIE L. BARKER; DON
SPRADLING, on behalf of themselves and all others similarly
situated,
Plaintiffs - Appellants,
v.
GORDON BALL,
Defendant - Appellee.
Appeal from the United States District Court for the Northern
District of West Virginia, at Wheeling. Frederick P. Stamp,
Jr., Senior District Judge. (5:06-cv-00085-FPS)
Argued: March 26, 2009 Decided: June 12, 2009
Before NIEMEYER and MICHAEL, Circuit Judges, and Eugene E.
SILER, Jr., Senior Circuit Judge of the United States Court of
Appeals for the Sixth Circuit, sitting by designation.
Reversed and remanded by unpublished per curiam opinion.
John Jacob Pentz, III, CLASS ACTION FAIRNESS GROUP, Maynard,
Massachusetts, for Appellants. William Gordon Ball, Knoxville,
Tennessee, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
Gordon Ball, as counsel on behalf of a plaintiff class in
Tennessee state court, settled a class action between consumer
class members and defendant United States Tobacco (UST). Some
of the members of the plaintiff class filed suit against Ball
alleging claims for breach of fiduciary duty, conversion, and
unjust enrichment relating to his conduct in settling the class
action. The district court dismissed the case. For the
following reasons, we reverse the order of the district court
and remand for further proceedings with respect to Plaintiffs’
claims against Ball.
I. Factual and Procedural Background
The Jefferson County Circuit Court in Tennessee approved a
class action settlement between chewing tobacco manufacturer UST
and consumers residing in thirteen different states (including
West Virginia) who purchased moist snuff tobacco. The
settlement agreement awarded the class $12.5 million in UST
coupons and contained two clauses relevant to this appeal: one
calling for the Tennessee court to retain jurisdiction over the
settlement and a “Most Favored Nations” (MFN) clause. The MFN
clause entitled class members to receive additional coupons in
the event that pending class actions in other jurisdictions
regarding the same allegations against UST yielded a higher
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settlement value. Around the time such a class action was being
settled for a much higher value, class counsel (allegedly
without notice to the class) agreed to amend the settlement to
eliminate the MFN clause in exchange for $2.5 million in coupons
and $500,000 attorneys’ fees from UST. The Tennessee court
entered an order amending the settlement to that effect. Months
later, members of the class residing in West Virginia
(Plaintiffs) learned of the amendment and moved the Tennessee
court to vacate the order approving the amendment. That motion
was denied and no further state court litigation ensued.
Plaintiffs filed suit in the Northern District of West
Virginia against UST and class counsel alleging claims for
breach of fiduciary duty, conversion, and unjust enrichment
relating to the elimination of the MFN clause. Each defendant
(UST and two class counsel defendants) moved to dismiss,
asserting that the federal court lacked jurisdiction. After
finding the Rooker-Feldman doctrine did not bar jurisdiction,
the district court “declined” jurisdiction because of the
settlement agreement’s forum selection clause and the Tennessee
court’s order retaining jurisdiction over the settlement.
Plaintiffs appealed but subsequently settled with UST and all
but one of the class counsel defendants, Ball.
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II. Analysis
A. Rooker-Feldman
“We review the court’s dismissal pursuant to the Rooker-
Feldman doctrine de novo.” Burrell v. Virginia, 395 F.3d 508,
511 (4th Cir. 2005). The Rooker-Feldman doctrine applies where
“the losing party in state court filed suit in federal court
after the state proceedings ended, complaining of an injury
caused by the state-court judgment and seeking review and
rejection of that judgment.” Exxon Mobil Corp. v. Saudi Basic
Indus. Corp., 544 U.S. 280, 292 (2005). The district court
found Rooker-Feldman did not apply because the fourth factor
requiring application of the doctrine—that the state court
action has become final before the federal court suit has been
brought—was not met. It found this because the Plaintiffs filed
their federal court suit before the Tennessee court had ruled on
their motion to vacate. Plaintiffs urge that this finding be
affirmed and although Ball did not cross-appeal, he now argues
that the district court should have applied the doctrine.
Reviewing this issue de novo, only with respect to Ball,
Rooker-Feldman does not apply because Plaintiffs’ injuries were
not caused by the state court judgment. Their injuries were
caused by Ball’s alleged malfeasance as class counsel, which is
distinct from the state court judgment. “If a federal plaintiff
‘present[s] some independent claim, albeit one that denies a
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legal conclusion that a state court has reached in a case to
which he was a party . . . then there is jurisdiction and state
law determines whether the defendant prevails under principles
of preclusion.’” Exxon Mobil, 544 U.S. at 293 (quoting GASH
Assocs. v. Rosemont, 995 F.2d 726, 728 (7th Cir. 1993)). Here,
Ball was not even a party to the state court action and the
claims against him for breach of fiduciary duty, unjust
enrichment, and conversion are independent of the state court
judgment.
B. Forum Selection Clause and State Court Order Retaining
Jurisdiction
To the extent the district court’s decision rested on the
forum selection clause, it is reviewed de novo. Pee Dee Health
Care, P.A. v. Sanford, 509 F.3d 204, 209 (4th Cir. 2007). “[A]
motion to dismiss based on a forum-selection clause should be
properly treated under Rule 12(b)(3) as a motion to dismiss on
the basis of improper venue.” Sucampo Pharms., Inc. v. Astellas
Pharma, Inc., 471 F.3d 544, 550 (4th Cir. 2006).
Plaintiffs argued to the district court that even if the
forum selection clause were valid and governed the claims
against the UST defendants, it did not apply to the claims
against the class counsel because they were not parties to the
settlement. The court rejected this argument because the claims
against Ball related to the settlement.
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Reviewing this conclusion de novo, we disagree. In
analyzing the applicability of forum selection clauses, we use
general principles of contract interpretation. Sucampo Pharms.,
Inc., 471 F.3d at 550. Although the claims against Ball may have
“related to” the settlement agreement, Ball was not a party to
that agreement and is not bound by its terms. For the same
reason, the state court order incorporating the jurisdiction-
retaining terms of the settlement agreement does not preclude
concurrent jurisdiction over Plaintiffs’ claims against Ball.
C. Abstention
Finally, we consider the district court decision to “decline”
jurisdiction in its discretion. A district court’s decision to
decline jurisdiction based on abstention principles is reviewed
for an abuse of discretion. Vulcan Chem. Techs., Inc. v.
Barker, 297 F.3d 332, 341 (4th Cir. 2002). The Supreme Court in
Colorado River recognized that federal courts have a “virtually
unflagging obligation” to exercise jurisdiction given to them.
Colo. River Water Conservation Dist. v. United States, 424 U.S.
800, 817 (1976). After rejecting Pullman, Burford, and Younger
as bases for abstention, the Court noted that “the circumstances
permitting the dismissal of a federal suit due to the presence
of a concurrent state proceeding for reasons of wise judicial
administration are considerably more limited than the
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circumstances appropriate for [the three other types of]
abstention.” Id. at 814-17, 818.
We have noted that, when faced with a possible application
of Colorado River abstention, the court must first decide
whether a parallel duplicative state proceeding exists.
McLaughlin v. United Virginia Bank, 955 F.2d 930, 935 (4th Cir.
1992). “Suits are parallel if substantially the same parties
litigate substantially the same issues in different forums.”
New Beckley Min. Corp. v. Int’l Union, United Mine Workers of
Am., 946 F.2d 1072, 1073 (4th Cir. 1991). In New Beckley, we
found the district court abused its discretion in abstaining
because the two suits posed different issues and the remedy
sought was not the same. Id. at 1074. The court noted “‘[T]he
Colorado River doctrine does not give federal courts carte
blanche to decline to hear cases within their jurisdiction
merely because issues or factual disputes in those cases may be
addressed in past or pending proceedings before state
tribunals.’” Id. (quoting United States v. SCM Corp., 615
F.Supp. 411, 417 (D.Md. 1985)).
Here, Ball was not a party to the state court settlement
and the claims against him—for breach of fiduciary duty, unjust
enrichment, and conversion—are new claims seeking new remedies.
The motion to vacate the order in the Tennessee court was
therefore not “duplicative” of Plaintiffs’ current claims. In
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light of this, the district court erred when it declined
jurisdiction.
Neither the forum selection clause, the state order
retaining jurisdiction, nor abstention under Colorado River
justifies dismissal. The order of the district court is
REVERSED AND REMANDED.
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