949 F.3d 283
6th Cir.2020Background
- QAI, a minority-owned Cincinnati company, alleges beginning in 2015 P&G managers engaged in racially discriminatory conduct that impaired QAI’s performance and forced QAI into an unfavorable Termination Agreement that led to its liquidation.
- In January 2017 P&G sued QAI in Ohio state court for breach of the M2K Agreement; QAI answered and pleaded counterclaims for contract and declaratory relief but did not assert a § 1981 (race-discrimination) claim there.
- In February 2018 QAI filed a standalone § 1981 action against P&G in federal court; P&G moved to dismiss, arguing (1) QAI released the § 1981 claim in the Termination Agreement and (2) the § 1981 claim was a compulsory counterclaim under Ohio Civ. R. 13(A).
- The district court dismissed QAI’s federal suit on the ground that the § 1981 claim was a compulsory counterclaim logically related to the state action; the court did not decide the release/waiver defense.
- While the federal appeal was pending, QAI sought to amend its state-court counterclaim to add the identical § 1981 claim; the state trial court denied leave as futile, ruling the § 1981 claim was a compulsory counterclaim and was released by the Termination Agreement.
- The Sixth Circuit majority concluded that although QAI’s § 1981 claim is properly characterized as a compulsory counterclaim under Ohio law, a federal court may not enforce a state compulsory-counterclaim rule to dismiss a federal suit while the parallel state action is pending unless preclusion applies; it reversed and remanded. A separate dissent argued the panel improperly decided an unbriefed, non‑preserved issue and would have affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether QAI’s § 1981 claim is a compulsory counterclaim under Ohio Civ. R. 13(A) | § 1981 claim is not "logically related" to state contract claims | § 1981 arises from the same transaction/occurrence and is therefore compulsory | Court: § 1981 claim is analytically a compulsory counterclaim under Ohio law |
| Whether a federal court may dismiss a federal claim for failure to assert a state compulsory counterclaim while the state action is pending | Federal suit should proceed; state rule cannot strip federal forum absent preclusion | State compulsory‑counterclaim rule requires claim be litigated in state court | Court: Federal courts cannot enforce a state compulsory-counterclaim rule against a federal plaintiff outside of preclusion; dismissal on that basis was improper |
| Whether the state trial court’s interlocutory denial to add the § 1981 counterclaim precludes QAI’s federal suit (preclusion / Rooker–Feldman) | State interlocutory order is not a final judgment and thus not preclusive; Rooker–Feldman inapplicable | State ruling bars the claim and federal relief would impermissibly review state decision | Court: Interlocutory state order is not preclusive; Rooker–Feldman does not bar QAI’s federal suit here |
| Whether QAI released the § 1981 claim in the Termination Agreement | § 1981 claim survives; no binding release | Termination Agreement released and waived § 1981 claims | Court: Release/waiver issue not decided by district court; remanded for consideration in first instance |
Key Cases Cited
- Rettig Enters., Inc. v. Koehler, 626 N.E.2d 99 (Ohio 1994) (defines when claims are "logically related" for compulsory-counterclaim rule)
- Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976) (abstention doctrine and federal obligation to exercise jurisdiction)
- Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (2005) (limits Rooker–Feldman to cases seeking review of state-court judgments after state proceedings ended)
- Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75 (1984) (federal courts must give preclusive effect only to state-court judgments)
- Penn Gen. Cas. Co. v. Commonwealth, 294 U.S. 189 (1935) (federal and state courts with concurrent jurisdiction may both proceed until one renders final judgment)
- Pieper v. Am. Arbitration Ass'n, Inc., 336 F.3d 458 (6th Cir. 2003) (interlocutory state orders cannot be the basis for res judicata or collateral estoppel under Ohio law)
- Grava v. Parkman Twp., 653 N.E.2d 226 (Ohio 1995) (claim preclusion under Ohio law requires final judgment)
- Baatz v. Columbia Gas Transmission, LLC, 814 F.3d 785 (6th Cir. 2016) (discusses first-to-file and other federal tools for managing duplicative federal suits)
- Handy v. Shaw, Bransford, Veilleux & Roth, 325 F.3d 346 (D.C. Cir. 2003) (discusses limits on federal enforcement of state procedural rules in state-federal duplicative litigation)
- Hapgood v. City of Warren, 127 F.3d 490 (6th Cir. 1997) (example of enforcing state procedural rules through preclusion doctrine)