Patriots Bank v. Harbison

• Court: District Court, E.D. Missouri
• Decided: July 7, 2022
• Docket: 4:21-cv-00991
• Status: Unknown

Opinion

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION

PATRIOTS BANK, ) ) Plaintiff, ) ) vs. ) Case No. 4:21CV991 HEA ) CHRISTOPHER and REGINA HARBISON, ) ) Defendants. )

OPINION, MEMORANDUM AND ORDER This matter is before the Court on Defendants’ Motion to Stay, Abstain or Abate, [Doc. No. 20]. Plaintiff opposes the Motion. For the reasons set forth below, the Motion will be denied., Facts and Background Between June 2016 and November 2019, Plaintiff and CRAZ Investments, LLC, CHAB Development, LLC, Jonesburg Sawmill & Pallet Co., Inc, and Black River Motel, LLC. (collectively, the “borrowers”), entered into several lending relationships. On July 7, 2021, Plaintiff commenced a receivership action styled Patriots Bank v. Black River Motel, LLC et al., Case No: 21WA-CC00250 (“Receivership Case”), in the Circuit Court of Washington County, Missouri (“State Court”). In its Verified Petition (“Petition to Appoint Receiver”), Plaintiff sought the appointment of GlassRatner Advisory & Capital Group LLC (“GlassRatner”) as general receiver for the borrowers. The state court appointed GlassRatner as receiver on

July 22, 2021. Borrowers sought to have the receivership vacated. This motion was denied by the state court on April 1, 2022. Defendants in this action move to stay under the Colorado River Doctrine.

Discussion “The federal courts have a ‘virtually unflagging obligation ... to exercise the jurisdiction given them.’ ” Federated Rural Elec. Ins. Corp. v. Ark. Elec. Coops., Inc., 48 F.3d 294, 297 (8th Cir. 1995) (quoting in Colorado River Water

Conservation District v. United States, 424 U.S. 800, 817 (1976)). “This obligation does not evaporate simply because there is a pending state court action involving the same subject matter.” Id. (citing Colo. River, 424 U.S. at 813-14).

“Thus, a federal court may divest itself of jurisdiction by abstaining [under Colorado River] only when parallel state and federal actions exist and exceptional circumstances warrant abstention.” Fru-Con Const. Corp. v. Controlled Air, Inc., 574 F.3d 527, 534 (8th Cir. 2009) (citing Colo. River, 424 U.S. at 817-18).

The existence of parallel state and federal proceedings is a “threshold matter,” and such proceedings must be present “before Colorado River is implicated.” Id. at 535. “The prevailing view is that state and federal proceedings

are parallel for purposes of Colorado River abstention when substantially similar parties are litigating substantially similar issues in both state and federal court.” Id. (citing Federated Rural Elec., 48 F.3d at 297). However, “[t]he pendency of a state

claim based on the same general facts or subject matter as a federal claim and involving the same parties is not alone sufficient.” Id. There must be “substantial similarity” between the state and federal proceedings. Id. “Substantial similarity”

occurs “when there is a substantial likelihood that the state proceeding will fully dispose of the claims presented in the federal court.” Id. (citing TruServ Corp. v. Flegles, Inc., 419 F.3d 584, 592 (7th Cir. 2005)). A federal court must exercise jurisdiction “if there is any doubt as to the parallel nature of the state and federal

proceedings.” Id. (citing AAR Int'l, Inc. v. Nimelias Enter. S.A., 250 F.3d 510, 520 (7th Cir. 2001)). If there are parallel proceedings, courts must then determine whether there

are “exceptional circumstances” warranting abstention. Id. at 534. Courts have developed a non-exhaustive list of six factors to weigh in assessing whether such exceptional circumstances are present. Id. Those factors are: (1) whether there is a res over which one court has established jurisdiction, (2) the inconvenience of the federal forum, (3) whether maintaining separate actions may result in piecemeal litigation, unless the relevant law would require piecemeal litigation and the federal court issue is easily severed, (4) which case has priority—not necessarily which case was filed first but a greater emphasis on the relative progress made in the cases, (5) whether state or federal law controls, especially favoring the exercise of jurisdiction where federal law controls, and (6) the adequacy of the state forum to protect the federal plaintiff's rights. Id. (quoting Mountain Pure, LLC v. Turner Holdings, LLC, 439 F.3d 920, 926 (8th Cir. 2006)).

The Court must first address the “threshold matter” of whether the state and federal proceedings at issue are parallel. See id. Defendants argue that the cases are parallel because the allegations in both the petition in state court and the complaint

herein plead substantially the same facts. However, as Plaintiff points out, the two suits are not litigating the same issues by the same parties. The parties in the state court include Plaintiff and four borrowing entities; Defendants in this action are not parties to the state receivership action. The state action is based on the issue of

whether a receiver is appropriate under the Missouri Commercial Receivership Act. This case is an action seeking to enforce guarantees executed by Defendants under Kansas law. There is no res in this matter, rather, it seeks monetary

recovery only based on the guarantees. Defendants’ argument that there may be inconsistent results is without merit. Plaintiff is only entitled to the amount it is owed. The Court agrees with Plaintiff; the proceedings at issue are not parallel. Conclusion

Because there are no parallel proceedings, the Court need not analyze any further whether Colorado River abstention is warranted. See Fru-Con Const., 574 F.3d at 535 (“Because the federal district court compared ... non-parallel

proceedings, the Colorado River doctrine did not [apply]. Thus, we actually need not consider whether the district court properly weighed the [six ‘exceptional circumstance’ | factors.”). The Court is without discretion to abstain under the Colorado River doctrine absent parallel proceedings. Thus, Defendants' Motion to Stay and Abstain must be denied. Accordingly, IT IS HEREBY ORDERED that Defendants’ Motion to Stay, Abstain or Abate, [Doc. No. 20], is DENIED. Dated this 7" day of July, 2022.

nie — UNITED STATES DISTRICT JUDGE