Wells v. State Farm Mutual ( 1998 )

UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 97-30970
JOHN L WELLS, ON BEHALF OF LESLIE L WELLS,
ON BEHALF OF RYAN WELLS, ON BEHALF OF JANET WELLS,
INDIVIDUALLY & AS THE ADMINISTRATOR OF THE ESTATE,
Plaintiff - Appellant,
VERSUS
STATE FARM MUTUAL AUTOMOBILE INSURANCE CO,
Defendant
G A N NATIONAL INSURANCE CO,
Defendant - Appellee.
Appeal from the United States District Court
For the Western District of Louisiana
(97-CV-1336)
May 6, 1998
Before WIENER, BARKSDALE, and DEMOSS, Circuit Judges.
PER CURIAM:*
Wells appeals the district court’s order denying his motion to
compel arbitration and staying the federal suit pending the
*
Pursuant to Local Rule 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in Local Rule 47.5.4.
resolution of a parallel state court proceeding. We have
jurisdiction under 28 U.S.C. § 1291, see Moses H. Cone Mem’l Hosp.
v. Mercury Constr. Corp., 460 U.S. 1, 8-13 (1983), and now reverse.
I
The district courts have a “virtually unflagging obligation”
to exercise the jurisdiction given to them. Colorado River Water
Conservation Dist. v. United States, 424 U.S. 800, 817 (1976).
Where there is concurrent jurisdiction between federal and state
courts in a particular suit, “[o]nly the clearest of justifications
will warrant dismissal” or stay of the federal proceedings. Id. at
818-19. In Colorado River, the Supreme Court announced four
factors a district court is to consider in determining whether to
exercise jurisdiction in a concurrent jurisdiction situation:
(1) whether a court has assumed jurisdiction over property at
issue; (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. Id. at
818. The Supreme Court later added two other considerations: the
extent to which federal law applies to the suit and the adequacy of
the state-court proceeding to protect the parties’ respective
rights. See Moses H. Cone, 460 U.S. at 23-26. Applying these
factors to the instant case, we hold that there is no justification
for the district court’s surrender of jurisdiction.
2
The first Colorado River consideration is not relevant here.
The other factors lie in favor of the district court exercising
jurisdiction over the case. GAN is a national corporation and
would not be prejudiced by litigating in the district court in
Louisiana. There is no concern of piecemeal litigation as GAN
admits that no court, state or federal, has decided the
arbitrability issue. The res judicata effect of the district
court’s ultimate ruling on the arbitrability issue further lessens
the concern over piecemeal litigation. Though GAN filed its state
court suit before Wells instigated the federal proceeding, priority
of jurisdiction is not “measured exclusively by which complaint was
filed first, but rather in terms of how much progress has been made
in the two actions.” Moses H. Cone, 460 U.S. at 21-22. GAN points
out in its brief that the state court trial has been delayed due to
a very time-intensive case pending in that forum and that a trial
date has not been set. “In realistic terms, the federal suit was
running well ahead of the state suit at the very time that the
District Court decided to refuse to adjudicate the case.” Id. at
22. Finally, just as in Moses H. Cone, there is a strong federal
interest in this case to move the parties to an arbitrable dispute
out of court and into arbitration as quickly and easily as
possible, and because of the phrasing of the Federal Arbitration
Act (FAA), see 9 U.S.C. § 4, the state-court proceeding may be
inadequate to protect Wells’ rights. See Moses H. Cone, 460 U.S.
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at 23-27. The district court’s stay frustrates the statutory
policy of providing an expeditious and summary hearing to resolve
the arbitrability of the dispute. See id. at 22.
II
GAN’s argument that the FAA does not apply to this litigation
due to the McCarren-Ferguson Act is without merit. See Miller v.
National Fidelity Ins. Co., 588 F.2d 185, 187 (5th Cir. 1979).
III
The federal district court construed this case to be an
attempted appeal from the actions of the state court. The court
therefore decided to stay proceedings based on the Rooker-Feldman
doctrine, which provides that federal courts “lack jurisdiction to
entertain collateral attacks on state judgments.” United States v.
Shepherd, 23 F.3d 923, 924 (5th Cir. 1994). While the state court
has indeed imposed an injunction on Wells, there is no final state
judgment. As a result, the state court’s actions have no res
judicata effect because the pertinent issue of law -- whether the
parties are obligated to arbitrate their dispute -- has not been
“actually litigated and determined by a valid and final judgment.”
CHARLES ALAN WRIGHT, LAW OF FEDERAL COURTS § 100A, at 724 (5th ed. 1994).
Consistent with its roots in the doctrine of res judicata, the
Rooker-Feldman doctrine likewise cannot apply to prevent litigation
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of a legal issue in federal court when the issue of law has not
been actually litigated and determined by a valid and final
judgment.
IV
The judgment of the district court staying the federal
proceedings is REVERSED. We REMAND for further proceedings
consistent with this opinion, including deciding the arbitrability
issue.
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