Fru-Con Construction Corp. v. Controlled Air, Inc.

574 F.3d 527, 2009 U.S. App. LEXIS 16824, 2009 WL 2194815
CourtCourt of Appeals for the Eighth Circuit
DecidedJuly 24, 2009
Docket08-1712
StatusPublished
Cited by88 cases

This text of 574 F.3d 527 (Fru-Con Construction Corp. v. Controlled Air, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fru-Con Construction Corp. v. Controlled Air, Inc., 574 F.3d 527, 2009 U.S. App. LEXIS 16824, 2009 WL 2194815 (8th Cir. 2009).

Opinions

BEAM, Circuit Judge.

Fru-Con Construction Corporation and Austin Maintenance and Construction, Inc. (the Joint Venture) appeal the district court’s application of Colorado River1 abstention to dismiss the Joint Venture’s breach of contract action against Controlled Air, Inc. We reverse.

I. BACKGROUND

Nordic Biofuels of Ravenna, L.L.C., hired the Joint Venture through a real estate improvement contract as defined by Nebraska Revised Statute § 52-130 to construct an ethanol production facility in Ravenna, Nebraska. The Joint Venture engaged Controlled Air to construct the grain receiving, storage, and milling system for the facility. Their agreement contained law and forum selection clauses requiring all disputes between the parties to be governed by Missouri law and brought in Missouri state court or the federal district court for the Eastern District of Missouri. Additionally, the contract allowed the Joint Venture to terminate Controlled Air for specified reasons and to take over the work being performed after giving seventy-two hours written notice.

A dispute between Controlled Air and the Joint Venture arose and work ceased on the project. Controlled Air supplied labor and materials through January 14, 2007, and the Joint Venture assumed responsibility for the work on January 17, 2007. Pursuant to the Nebraska Construction Lien Act (NCLA), Controlled Air recorded a construction lien on March 1, [531]*5312007, for purportedly unpaid labor and materials. The recording alleged that the Joint Venture owed Controlled Air $1,496,636 for labor and materials provided through January 14. Controlled Air filed suit to foreclose the construction lien in the District Court of Buffalo County, Nebraska, on May 18, 2007. The Joint Venture, however, had previously filed a breach of contract action against Controlled Air in the United States District Court for the Eastern District of Missouri. The complaint alleged that the Joint Venture incurred damages of $1,500,000 after January 17, 2007, as a result of Controlled Air’s breach of the agreement.

Believing that its Nebraska lien foreclosure action could serve to litigate the entire dispute between the parties, Controlled Air filed a motion asking the federal court to abstain from or dismiss the Joint Venture’s breach of contract claim in the Eastern District of Missouri. Believing that the federal court forum could serve the same purpose, the Joint Venture filed a lien relief bond in Buffalo County, Nebraska, in accordance with the NCLA, releasing the construction lien and clearing the lien from the title to the real estate in question. A motion to dismiss or stay Controlled Air’s lien foreclosure proceeding was then filed by the Joint Venture in the District Court of Buffalo County. Thus, a federal-state forum fight came to life.

A. Nebraska Proceedings

The Joint Venture’s motion to dismiss the lien foreclosure proceeding alleged that by filing a surety bond issued by a company authorized to do business in Nebraska, the action was no longer in rem and the forum selection clause applied, mandating jurisdiction in Missouri. During the first hearing on this matter, the Nebraska court held that the bond was ineffective because only a person having an interest in the real estate may file a bond under Nebraska Revised Statute § 52-142, and the Joint Venture did not have an interest in the lien property.2 After the Joint Venture amended the bond, the Nebraska court again held the bond ineffective because it failed to identify where and upon whom service should be made. Finally, after the Joint Venture corrected all purported mistakes, the Nebraska court ruled on the motion to dismiss.

The Nebraska court first noted that the bond discharged the real estate lien,3 but then concluded that the foreclosure action was still in existence “in so much as the lien is transferred to the submitted surety bond.” On this basis, the court held that the validity of the original construction lien and the amounts that might be owed on it were still in question. Thus, the court decided that an appropriate remedy was not available in the federal forum and denied the motion to dismiss.

Although the contract action had not been asserted in Nebraska, the state court, in making its ruling, applied Nebraska Revised Statute § 25-415 to dispose of the contract’s forum selection clause. That section codifies Nebraska’s recognition of forum selection clauses, but provides five exceptions. While the court originally viewed three of the exceptions as poten[532]*532tially applicable, it ultimately determined that the Joint Venture’s bond was ineffective in releasing the lien from the real estate, creating an in rem action that had to be resolved at the situs of the disputéisebraska. However, as earlier stated, the Nebraska court later recognized its error as to the efficacy of the bond in releasing the real estate lien and thereafter, upon reconsideration, made its dismissal decision based upon the purported “unique[ness of the lien action] to the Nebraska jurisdiction” — making a remedy not available in the federal forum. As mentioned below, the federal district court found this to be error, a matter with which we agree and discuss in greater detail in Section IIA.

B. Federal Proceedings

The District Court for the Eastern District of Missouri recognized its subject matter jurisdiction but granted Controlled Air’s motion to abstain from and dismiss the Joint Venture’s breach of contract action, but only after the Nebraska court retained jurisdiction over the lien foreclosure proceeding.4 The Joint Venture disputed Controlled Air’s motion to abstain in the federal case on grounds that the construction lien property was no longer under the exclusive control of the Nebraska court and because the forum selection clause mandated that jurisdiction over its contract action was properly in the federal court.

Clearly believing that the federal contract action and the state lien foreclosure proceeding were parallel matters5 — unaware of the fact that the Joint Venture, under protest and out of an abundance of caution, had later asserted its contract action against Controlled Air in the Nebraska court, Controlled Air, Inc. v. Abengoa Bioenergy of Neb., LLC, No. CI07319 (D. Ct. Buffalo County, Neb. Oct. 22, 2007) (answer and counterclaim) — the federal district court first referenced the six abstention factors created by Colorado River and then proceeded to discuss each in turn. The court found that the following factors favored abstention: (1) while the Nebraska action is not in rem and the state court does not have exclusive jurisdiction, the state court has an interest in adjudicating the contract dispute; (2) allowing the federal action to continue would result in piecemeal litigation; (3) the Nebraska court is a more convenient forum; (4) state law controls; and (5) the state court can adequately protect the Joint Venture’s rights. The sixth and final factor regarding priority of filing (of the federal contract action and the state lien foreclosure action) was held neutral. Then, the district court abstained from and dismissed the federal case.

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Bluebook (online)
574 F.3d 527, 2009 U.S. App. LEXIS 16824, 2009 WL 2194815, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fru-con-construction-corp-v-controlled-air-inc-ca8-2009.