Wells v. State Farm Mutual

Opinion

UNITED STATES COURT OF APPEALS For the Fifth Circuit

No. 97-30970

JOHN L WELLS, ON BEHALF OF LESLIE L WELLS, ON BEHALF OF RYAN WELLS, ON BEHALF OF JANET WELLS, INDIVIDUALLY & AS THE ADMINISTRATOR OF THE ESTATE,

Plaintiff - Appellant,

VERSUS

STATE FARM MUTUAL AUTOMOBILE INSURANCE CO,

Defendant

G A N NATIONAL INSURANCE CO,

Defendant - Appellee.

Appeal from the United States District Court For the Western District of Louisiana (97-CV-1336)

May 6, 1998

Before WIENER, BARKSDALE, and DEMOSS, Circuit Judges.

PER CURIAM:*

Wells appeals the district court’s order denying his motion to

compel arbitration and staying the federal suit pending the

* Pursuant to Local Rule 47.5, the Court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in Local Rule 47.5.4. resolution of a parallel state court proceeding. We have

jurisdiction under 28 U.S.C. § 1291, see Moses H. Cone Mem’l Hosp.

v. Mercury Constr. Corp., 460 U.S. 1, 8-13 (1983), and now reverse.

I

The district courts have a “virtually unflagging obligation”

to exercise the jurisdiction given to them. Colorado River Water

Conservation Dist. v. United States, 424 U.S. 800, 817 (1976).

Where there is concurrent jurisdiction between federal and state

courts in a particular suit, “[o]nly the clearest of justifications

will warrant dismissal” or stay of the federal proceedings. Id. at

818-19. In Colorado River, the Supreme Court announced four

factors a district court is to consider in determining whether to

exercise jurisdiction in a concurrent jurisdiction situation:

(1) whether a court has assumed jurisdiction over property at

issue; (2) the inconvenience of the federal forum; (3) the

desirability of avoiding piecemeal litigation; and (4) the order in

which jurisdiction was obtained by the concurrent forums. Id. at

818. The Supreme Court later added two other considerations: the

extent to which federal law applies to the suit and the adequacy of

the state-court proceeding to protect the parties’ respective

rights. See Moses H. Cone, 460 U.S. at 23-26. Applying these

factors to the instant case, we hold that there is no justification

for the district court’s surrender of jurisdiction.

2 The first Colorado River consideration is not relevant here.

The other factors lie in favor of the district court exercising

jurisdiction over the case. GAN is a national corporation and

would not be prejudiced by litigating in the district court in

Louisiana. There is no concern of piecemeal litigation as GAN

admits that no court, state or federal, has decided the

arbitrability issue. The res judicata effect of the district

court’s ultimate ruling on the arbitrability issue further lessens

the concern over piecemeal litigation. Though GAN filed its state

court suit before Wells instigated the federal proceeding, priority

of jurisdiction is not “measured exclusively by which complaint was

filed first, but rather in terms of how much progress has been made

in the two actions.” Moses H. Cone, 460 U.S. at 21-22. GAN points

out in its brief that the state court trial has been delayed due to

a very time-intensive case pending in that forum and that a trial

date has not been set. “In realistic terms, the federal suit was

running well ahead of the state suit at the very time that the

District Court decided to refuse to adjudicate the case.” Id. at

22. Finally, just as in Moses H. Cone, there is a strong federal

interest in this case to move the parties to an arbitrable dispute

out of court and into arbitration as quickly and easily as

possible, and because of the phrasing of the Federal Arbitration

Act (FAA), see 9 U.S.C. § 4, the state-court proceeding may be

inadequate to protect Wells’ rights. See Moses H. Cone, 460 U.S.

3 at 23-27. The district court’s stay frustrates the statutory

policy of providing an expeditious and summary hearing to resolve

the arbitrability of the dispute. See id. at 22.

II

GAN’s argument that the FAA does not apply to this litigation

due to the McCarren-Ferguson Act is without merit. See Miller v.

National Fidelity Ins. Co., 588 F.2d 185, 187 (5th Cir. 1979).

III

The federal district court construed this case to be an

attempted appeal from the actions of the state court. The court

therefore decided to stay proceedings based on the Rooker-Feldman

doctrine, which provides that federal courts “lack jurisdiction to

entertain collateral attacks on state judgments.” United States v.

Shepherd, 23 F.3d 923, 924 (5th Cir. 1994). While the state court

has indeed imposed an injunction on Wells, there is no final state

judgment. As a result, the state court’s actions have no res

judicata effect because the pertinent issue of law -- whether the

parties are obligated to arbitrate their dispute -- has not been

“actually litigated and determined by a valid and final judgment.”

CHARLES ALAN WRIGHT, LAW OF FEDERAL COURTS § 100A, at 724 (5th ed. 1994).

Consistent with its roots in the doctrine of res judicata, the

Rooker-Feldman doctrine likewise cannot apply to prevent litigation

4 of a legal issue in federal court when the issue of law has not

been actually litigated and determined by a valid and final

judgment.

IV

The judgment of the district court staying the federal

proceedings is REVERSED. We REMAND for further proceedings

consistent with this opinion, including deciding the arbitrability

issue.