Telecommunications of Indiana, Inc. v. Westel Service Corp.

663 F. Supp. 881, 1987 U.S. Dist. LEXIS 5775
CourtDistrict Court, N.D. Indiana
DecidedJune 30, 1987
DocketCiv. No. F 86-393
StatusPublished

This text of 663 F. Supp. 881 (Telecommunications of Indiana, Inc. v. Westel Service Corp.) is published on Counsel Stack Legal Research, covering District Court, N.D. Indiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Telecommunications of Indiana, Inc. v. Westel Service Corp., 663 F. Supp. 881, 1987 U.S. Dist. LEXIS 5775 (N.D. Ind. 1987).

Opinion

ORDER

WILLIAM C. LEE, District Judge.

This matter is before the court on defendants’ motion to dismiss or, in the alternative, to stay. For the reasons which follow, the motion will be «denied.

I. Background

Defendant Westel Service Corporation (Westel) is a California corporation whose principal place of business is located in Los Angeles. Defendant Roger Behrstock (Behrstock) is its chairman. Westel is primarily engaged in repairing, remanufactur-ing, and refurbishing telephones in the western region of the United States.

In 1986, Westel embarked on a program to expand its business by acquiring other similar businesses in the midwest and southeast areas of the country. In connection with this effort, Westel contacted plaintiff Telecommunication of Indiana, Inc. (Telecommunication), a telephone repair company located in the State of Indiana.

On February 13, 1986, Westel entered into a written option agreement (Option Agreement) with Telecommunication to acquire Telecommunication’s assets. At that time, plaintiffs Ellen Leslie, James Leslie, Charlotte Maxwell, and Steven Maxwell were the principal officers and shareholders of Telecommunication. Unless otherwise indicated, Telecommunication and these principal officers are hereinafter referred to as the “Indiana parties.” Westel paid the Indiana parties $25,000.00 in consideration for the option. The Option Agreement was to stay in effect until June 30,1986. It specifically stated that Indiana law was to control as to all matters concerning the Option Agreement.

After entering into the Option Agreement, Westel and Behrstock contacted Robert Kopple, Stanley Glickman, Jerry Blum, and K & G Financial, Inc. (hereinafter collectively referred to as the “California parties”), for the purpose of determining whether they would be interested in participating in the financing of Westel’s acquisition of Telecommunication. In connection with these communications, Behrstock disclosed the specific terms and conditions of the Option Agreement and Westel’s future plans. Additionally, the California parties were introduced to Ellen Leslie and financial information was provided to them.

On or about June 26, 1986, Ellen Leslie informed Behrstock that she did not wish to become involved with the California parties and suggested that the purchase agreement be restructured. On June 27, 1986, Westel and Behrstock allegedly entered into an oral agreement with the Indiana parties to acquire the assets of Telecommunication (Acquisition Agreement).

On or about June 29, 1986, Behrstock advised Kopple that the acquisition of Telecommunication had been restructured and that the California parties would not be involved. Behrstock also disclosed the terms and conditions of the Acquisition Agreement to Kopple.

On or about June 30, 1986, Ellen Leslie advised Behrstock not to travel to Indiana to consummate the Acquisition Agreement. Rather, she told him that she intended to travel to Los Angeles within the next few days to discuss and sign the Acquisition Agreement.

Without informing Westel and Behrs-tock, the California parties had entered into [883]*883negotiations with the Indiana parties to acquire the assets of Telecommunication prior to this date. On or about June 30, 1986, Ellen Leslie contacted Behrstock to inform him that the Indiana parties would not sell the assets of Telecommunication to him. The next day, Ellen Leslie traveled to Los Angeles to execute an agreement with the California parties for the acquisition of Telecommunication. Following the acquisition of Telecommunication by the California parties, they founded a new corporation, National Telecommunications of Indiana, Inc. (National).

II. Procedural History

Two lawsuits have arisen out of these events. Westel and Behrstock sued both the Indiana parties and the California parties in Los Angeles Superior Court on September 3, 1986. The California complaint is in eight counts. Three counts concern the Indiana parties while the remaining five concern the California parties. The complaint seeks compensatory and punitive damages on theories of breach of contract, fraud and deceit, interference with contractual relations, breach of fiduciary duty, and trade libel.

The instant suit was filed by the Indiana parties against Westel and Behrstock on November 3, 1986. Counts I and II seek compensatory damages for breach of the Option Agreement and intentional interference with contractual relations. Counts III and IV are declaratory judgment actions regarding the parties’ rights under the Option Agreement and the Acquisition Agreement, and the use of trade secrets revealed during the negotiations between the parties.

III. Issues

Westel and Behrstock filed the motion under consideration on March 20, 1987. It proceeds on two fronts. First, they argue that this case should be stayed due to the pendency of the parallel California action. Second, they contend that the suit should be dismissed pursuant to Rules 12(b)(7) and 19(a) of the Federal Rules of Civil Procedure for failure to join a necessary party, being National Telecommunications of Indiana, Inc., the corporation formed following the California parties’ purchase of Telecommunication. Neither argument has merit.

A. Motion to Stay

The starting point for determining the propriety of staying the instant litigation in light of the parallel California suit is Colorado River Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). That case noted that abstention from the exercise of jurisdiction for the traditional reasons of state-federal comity or the avoidance of constitutional decisions is

“an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it. Abdication of the obligation to decide cases can be justified under this doctrine only in the exceptional circumstances where the order to the parties to repair to the State court would clearly serve an important countervailing interest.”

Id. at 813, 96 S.Ct. at 1244 (quoting County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188-89, 79 S.Ct. 1060, 1063, 3 L.Ed.2d 1163 (1959)). Despite the extremely limited circumstances noted above in which the Court found abstention to be proper, it nonetheless created another, even narrower, exception to the exercise of jurisdiction: “considerations of ‘[w]ise judicial administration.’ ” Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246 (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180, 183, 72 S.Ct. 219, 221, 96 L.Ed. 200 (1952)).

It is this last exception which Westel and Behrstock seek to have applied in this case. Given the extremely narrow application of the “wise judicial administration” exception, they face a considerable burden in this motion.

Having set out the scope of the exception, Colorado River

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
663 F. Supp. 881, 1987 U.S. Dist. LEXIS 5775, Counsel Stack Legal Research, https://law.counselstack.com/opinion/telecommunications-of-indiana-inc-v-westel-service-corp-innd-1987.