The Scotts Company LLC v. Seeds, Inc.
688 F.3d 1154
9th Cir.2012Background
- Scotts entered a Kentucky bluegrass seed supply agreement with Seeds and could audit Seeds for compliance.
- Scotts filed a federal diversity action against Seeds over the audit provision.
- Growers sued Seeds and Scotts in state court for additional payments and breach-related claims arising from Seeds’ contract addenda.
- Scotts amended its federal complaint to add Growers as defendants and sought declaratory relief, specific performance, and damages.
- District court realigned parties, stripping diversity, and dismissed for lack of subject matter jurisdiction; or stayed under Brillhart/Colorado River.
- Court instructed on remand to reassess the realignment by focusing on the federal case’s primary purpose and potential exceptional circumstances.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May realignment rely on other case claims? | Scotts argues realignment should be based on the federal case’s primary dispute only. | Seeds contends Growers’ interests and related state actions justify realignment. | District court erred; realignment must focus on this federal case’s primary dispute, not other case claims. |
| Does realignment destroy complete diversity? | Realignment preserves forum integrity by realigning parties consistent with the dispute. | Realignment creates non-diverse parties and defeats subject-matter jurisdiction. | Realignment inappropriately affected diversity; but remand required to reassess under proper standard. |
| Are non-declaratory claims independent for abstention purposes? | Damages and non-declaratory claims remain independent of the declaratory relief request. | Interdependent facts tie declaratory and non-declaratory claims together. | District court abused discretion by applying the independence rule incorrectly; must evaluate under Colorado River on remand. |
| Whether exceptional circumstances justify abstention under Colorado River? | No exceptional circumstances required to abstain when independent claims exist. | Exceptional circumstances can support abstaining in parallel proceedings. | Court abused discretion for not assessing exceptional circumstances; remand to determine if such circumstances exist. |
| Remand instructions on realignment and abstention? | Proceed with merits if proper realignment manageable; otherwise vacate abstention. | Remain cautious about staying while parallel state actions proceed. | Reversed and remanded to allow district court to realign on proper basis and evaluate exceptional circumstances before deciding merits. |
Key Cases Cited
- City of Indianapolis v. Chase Nat’l Bank of N.Y., 314 U.S. 63 (U.S. 1941) (realignment permissible to reflect sides in dispute)
- Continental Airlines, Inc. v. Goodyear Tire & Rubber Co., 819 F.2d 1519 (9th Cir. 1987) (analyze principal purpose without considering related state-case claims)
- Prudential Real Estate Affiliates, Inc. v. PPR Realty, Inc., 204 F.3d 867 (9th Cir. 2000) (consider conflicts for realignment; do not rely on ongoing state suits)
- United Nat’l Ins. Co. v. R&D Latex Corp., 242 F.3d 1102 (9th Cir. 2001) (independence of claims; avoid intertwining declaratory and non-declaratory issues)
- GOV'T Emps. Ins. Co. v. Dizol, 133 F.3d 1220 (9th Cir. 1998) (en banc: declaratory relief context; independence of claims relevant)
- Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (U.S. 1976) (abstention framework; exceptional circumstances required)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. 1983) (balance factors for abstention in parallel-state actions)
- Casey v. Albertson’s Inc., 362 F.3d 1254 (9th Cir. 2004) (independence rule and proper application on remand)
- Snodgrass v. Provident Life & Accident Ins. Co., 147 F.3d 1163 (9th Cir. 1998) (independence criterion for non-declaratory claims)