SPRING CITY CORPORATION, trading as Spring II Associates v. AMERICAN BUILDINGS COMPANY v. Contractors of America, Inc. v. Palmer Construction Co., Inc.; Basile Construction Company American Buildings Company, Appellant, Spring City Corporation, trading as Spring II Associates v. Lynn Bradeen; Contractors of America, Inc.; American Buildings Company American Buildings Company, Appellant.
Nos. 98-1584, 98-1586, 98-1585
United States Court of Appeals, Third Circuit
Argued: July 27, 1999. Filed: Oct. 4, 1999.
193 F.3d 165
After it concluded that it had subject matter jurisdiction over Count Six, the District Court dismissed that count as expressly preempted by
IV.
We will affirm the District Court‘s decision that Counts One, Two, and Five are not completely preempted, and we will reverse its decision that Count Six is completely preempted and reverse its order dismissing Count Six. We will therefore remand to the District Court with instructions to remand Count Six to the New Jersey state court from which it was removed. It is that court that will be in a position to decide the express preemption issue, should U.S. Healthcare raise it there.
Steven G. Hall (formerly with McLain & Merritt, P.C.) (Argued), Robert B. Hill, McLain & Merritt, P.C., Atlanta, GA, Warren F. Sperling, Bennett, Bricklin & Saltzburg, Philadelphia, PA, for Appellant American Buildings Company.
John F. Brown, Jr., Matthew F. Noone (Argued), Cozen & O‘Connor, Philadelphia, PA, for Appellee Spring City Corp.
Before: SLOVITER, NYGAARD and MCKEE, Circuit Judges
SLOVITER, Circuit Judge.
This appeal has enough subsidiary procedural issues to bring a gleam to the eye of a civil procedure teacher. But there are two underlying issues that are dispositive--the nonreviewability of a remand order and the appropriateness of an order staying a duplicative federal action.
I.
BACKGROUND AND PROCEDURAL HISTORY
This suit filed by Spring City Corp. arises out of the partial collapse of its building in Limerick, Pennsylvania, in 1996 as the result of a heavy snow and ice fall. Construction of that building began in 1987. The companies participating in the project were Basile Corp. (“Basile“), which was general contractor for the construction, Contractors of America, Inc. (“Contractors“), which supplied metal building components for the building, American Buildings Co. (“American“), which manufactured and delivered the building components, and Palmer Construction Co. (“Palmer“), which actually constructed the building.
In September 1997, Spring City, a Pennsylvania corporation, filed suit in the Pennsylvania Court of Common Pleas alleging negligence, breach of contract, and breach of warranty, based on the building collapse against Contractors, a New Jersey corporation, and its president, Lynn Bradeen, a New Jersey citizen. In November 1997, Contractors filed writs of summons pursuant to
In December 1997, Spring City filed an amended complaint adding American as a defendant on one count. American then removed the action to federal court on the basis of diversity of citizenship. This case was assigned docket number 98-28. Also in December, Spring City filed a second action in state court, this one naming only American as a defendant. American removed this case as well, and it was assigned docket number 97-8127. Because there was diversity between Spring City and American, Spring City did not contest the removal of this second action. American subsequently filed a third-party complaint asserting negligence and breach of warranty claims against Contractors, and Contractors filed a fourth-party action for contribution and indemnification against
However, Spring City moved to remand No. 98-28 (the action in which, prior to removal, Palmer and Basile had been joined as third-party defendants under
American filed a timely Notice of Appeal. It argues on appeal that (1) the citizenship of third-party defendants should not be considered in determining diversity, and (2) the District Court improperly applied Colorado River. It seeks reactivation on the federal docket of the stayed cases and reinstatement of the remanded case.
II.
DISCUSSION
A.
The Order Remanding No. 98-28
American challenges the District Court‘s finding that no diversity existed in No. 98-28 on the ground that complete diversity exists among what it considers the real parties in the case, Spring City (plaintiff-appellee), Contractors (defendant), and American (defendant-appellant). American argues that the Pennsylvania citizenship of the two additional parties, Basile and Palmer, should not have been considered in determining diversity because they were solely “nominal” parties joined under state rules of procedure.
Of course, Spring City rejects American‘s view and emphasizes that, when Palmer and Basile were joined, it gained substantive rights against them under
In ruling that No. 98-28 should be remanded because there was no longer the requisite diversity of citizenship, the District Court noted the differences in the effect of joining a third-party defendant under the Pennsylvania Rules of Civil Pro
The District Court referred to other decisions of its colleagues holding that
American argues on appeal that in the context of removal, “federal law determines who is plaintiff and who is defendant,” citing Chicago Rock Island & Pacific R.R. Co. v. Stude, 346 U.S. 574, 580, 74 S.Ct. 290, 98 L.Ed. 317 (1954). It argues that where the operation of a local procedural rule interferes with a federal statute, which it states
It would be intriguing to analyze the jurisdictional issues presented by the application of
We cannot engage in these tantalizing arguments. We are precluded from doing so by
American relies on Chicago Rock Island & Pack R. Co. v. Stude, 346 U.S. 574, 74 S.Ct. 290, 98 L.Ed. 317 (1954), for its argument that we can consider the remand. In Chicago, a railroad challenged a condemnation award by filing separate suits in federal and state court. The railroad, which was nominally a defendant in the state action, removed that action to federal court. The district court subsequently granted the landowner‘s motion to dismiss the case filed in federal court but denied its motion to remand the state case. Each party appealed.
The Supreme Court held that although orders denying motions to remand are interlocutory and ordinarily not reviewable until final judgment, the two suits were functionally identical and had been treated as one case by the parties and the lower court. As a result, the Court treated both appeals as taken in a single case that had culminated in a final order--dismissal--which is patently appealable. Id. at 578, 74 S.Ct. 290.
Here, neither the parties nor the District Court have treated the three actions as one, nor would it have been appropriate for them to do so. More importantly, although orders granting motions to remand are interlocutory and thus not subject to appeal as final orders, see 16 Moore‘s Federal Practice § 107 App. 113[2][a] (Matthew Bender 3d ed.) (citing Railroad Co. v. Wiswall, 90 U.S. (23 Wall.) 507, 23 L.Ed. 103 (1874)),
It follows that we will dismiss so much of American‘s appeal as challenges the remand of No. 98-28.
B.
The Order Staying Nos. 97-8127 and 98-105
American also appeals from the District Court‘s order staying the two pending federal cases, Nos. 97-8127 and 98-105, arguing that the court erred in applying the Colorado River doctrine. We must first consider whether the stay order is appealable. Ordinarily, a stay is not a “final decision” of the district court. The established definition of a final decision for purposes of
In Michelson v. Citicorp National Services, Inc., 138 F.3d 508 (3d Cir.1998), we discussed the circumstances under which a stay order may be considered final and appealable. If the stay simply defers or postpones resolution of an action in federal court, then it is only a temporary measure not subject to appeal under
Here, as American argues, resolution of the remanded case in state court will have a preclusive effect on the stayed cases. American, which is a primary defendant in the stayed cases, has been joined as a third-party defendant in the remanded case. Under the Pennsylvania joinder rules, Spring City now has a direct claim against it just as though American had been a defendant originally.
In determining whether the situation before it fell within the Supreme Court‘s abstention doctrine enunciated in Colorado River, the District Court first determined that the remanded state action and the federal actions are parallel because both lawsuits concern the collapse of the roof, virtually the same parties are involved, and the state litigation will dispose of all of the claims raised in the federal case. Slip op. at 8-9. The court then stated that the decision fell within its discretionary power. In making that decision, the court outlined the following six factors referred to in Colorado River, Moses H. Cone, and Third Circuit cases: “(1) which court first assumed jurisdiction over property; (2) the inconvenience of the federal forum; (3) the desirability of avoiding piecemeal litigation; (4) the order in which jurisdiction was obtained; (5) whether federal or state law controls; and (6) whether the state court will adequately protect the interests of the parties.” Slip op. at 9-10.
The District Court then determined that three of those factors “weight[ed] heavily in favor of staying” the federal cases: avoiding piecemeal litigation, the fact that state law rather than federal law controls the issues, and the fact that a state court will adequately protect the parties’ interests. Slip op. at 11. The District Court considered irrelevant the three other factors that form the test: which court first asserted jurisdiction over the issue, the potential inconvenience of the federal forum, and the order in which jurisdiction was obtained. In holding that the stay was warranted, the District Court noted that the stay was “based on principles of judicial economy and sound judicial administration” recognized in Colorado River.
We cannot disagree that it would be more efficient to hold the federal cases in abeyance until the conclusion of the state case. But Colorado River abstention must be grounded on more than just the interest
We analyzed this issue in Ryan v. Johnson, 115 F.3d 193, 197 (3d Cir.1997), where we noted that in Moses H. Cone the Supreme Court reiterated the narrowness of Colorado River. We pointed out that even though it is important to prevent “piecemeal litigation,” a stay is appropriate only when there is a “strong federal policy against [such] litigation.” Id. at 197. This has long been our precedent. In University of Maryland v. Peat Marwick Main & Co., 923 F.2d 265, 275-76 (3d Cir.1991), we stated, “The general rule regarding simultaneous litigation of similar issues in both state and federal courts is that both actions may proceed until one has come to judgment, at which point that judgment may create a res judicata or collateral estoppel effect on the other action.”
In support of the District Court‘s decision to abstain, Spring City argues that there is a vital state interest in the construction of safe buildings, that lifting the stay will result in piecemeal litigation, that only state laws are at issue, and that the state court assumed jurisdiction-first and will adequately protect the parties’ rights. It also accuses American of forum-shopping in order to “receive a favorable ruling with respect to the economic loss doctrine.” Spring City‘s Brief at 36-37. American responds that if the fact that state law controls in this case mandated a stay, virtually any diversity case in which state law “was not entirely settled” would merit Colorado River abstention. As we stated in Ryan, just as “abstention cannot be justified merely because a case arises entirely under state law,” the question whether parties’ interests are protected is only relevant when they are not; that is, “when the state court is adequate, [this] factor carries little weight.” Ryan, 115 F.3d at 199, 200.
Spring City relies on this court‘s decision in Trent v. Dial Medical of Florida, Inc., 33 F.3d 217 (3d Cir.1994), where we affirmed the stay of a duplicative federal proceeding. In Ryan, however, we recognized that Trent, by focusing principally on the avoidance of piecemeal litigation, was inconsistent with our earlier decisions and the Supreme Court‘s emphasis in Colorado River and Moses H. Cone that a “strongly articulated congressional policy against piecemeal litigation” is required to justify a stay. Ryan, 115 F.3d at 198. We were concerned that were we to follow what appears to be Trent‘s emphasis on “piecemeal litigation,” we would “swallow[] up the century-old principle that the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction.” Id. (citations and internal quotation marks omitted). We held in Ryan that under Third Circuit Internal Operating Procedure 9.1, our prior case law takes precedence over an inconsistent later case. Id.
We agree and hold that Ryan represents the applicable law under Third Circuit and Supreme Court precedent. In Ryan, we narrowly construed the circumstances that would qualify for abstention,
We see nothing in the present case that constitutes the “exceptional circumstances” that would warrant abstention under Colorado River. We respect the considerations that caused the District Court to enter the stay but hold it erred in doing so. The parties have advised us that the state case is proceeding expeditiously. We are confident that the District Court can establish procedures in the federal cases that will minimize duplication of effort.
III.
CONCLUSION
In conclusion, we reiterate that federal courts have a “virtually unflagging obligation ... to exercise the jurisdiction given them.” Colorado River, 424 U.S. at 817, 96 S.Ct. 1236. For the reasons set forth, we will dismiss so much of this appeal as challenges the remand of No. 98-28, reverse the order staying the federal actions, and remand the remainder of this suit to the District Court. Each party to bear its own costs.
SLOVITER
CIRCUIT JUDGE