United States District Court, D. Colorado
ELNA SEFCOVIC, LLC, JUHAN, LP, and ROY ROYALTY, INC., individually and on behalf of all others similarly situated, Plaintiffs/Counter Defendants,
v.
TEP ROCKY MOUNTAIN, LLC, Defendant/Counterclaimant.
ORDER ON PENDING MOTIONS
MICHAEL E. HEGARTY, UNITED STATES MAGISTRATE JUDGE.
Plaintiffs
have filed an Unopposed Motion to Reconsider the Court's
November 9, 2018 Order [filed November 20, 2018: ECF No.
100]. I held oral argument concerning this motion on
January 14, 2019. I believe my original order is correct
insofar as it recognized that the vast majority of relevant
federal cases would, on a motion to remand or early motion to
dismiss, defer subject matter jurisdiction under comity
principles in a case involving a breach of settlement when
the underlying agreement was made a part of a state
court's final judgment, and that state court retained
exclusive jurisdiction over the implementation of the
settlement. However, because this case involves facts that
dictate against the exercise of comity here, I grant
the motion. First, I will clarify the basis for my
November 9, 2018 Order. Second, I will vacate the Order for
the reasons stated herein.
I.
BACKGROUND
This
lawsuit involves an alleged breach of a formula for
calculating mineral royalties, which formula was established
in a 2008 settlement of a Garfield County, Colorado lawsuit.
The case was removed to this Court from Denver County
District Court on August 17, 2017. After the completion of
class discovery, in August 2018, the parties moved for
preliminary approval of a class settlement, provisional
certification of an opt-out settlement class, approval of
notice to class members, an order establishing opt-out and
objection procedures, and the setting of a final hearing date
to consider approval of the class settlement, attorney's
fees, expenses and incentive awards. I granted this motion on
August 16, 2018.
Thereafter,
on October 5, 2018, certain plaintiffs from the Garfield
County settlement who were not parties to this litigation
attempted to intervene in this action and dismiss it. In my
original Order, I granted dismissal of this action based on
the facts that the Garfield County, Colorado District Court,
in the prior settlement (the Lindauer case), the
district judge entered an order in which she intended to
retain exclusive jurisdiction over a court-adopted and
stipulated settlement of a dispute over mineral royalty
payments, and the parties' lawsuit here arises squarely
under that settlement. The state court's Judgment, at the
parties' request, gave approval to the class settlement
agreement, ordered that the parties “shall take any and
all steps necessary to implement the Settlement Agreement
according to its terms and the terms of this Order, ”
“barred and permanently enjoined” the class
members “from commencing or prosecuting either directly
. . . or in any capacity, any of the Settled Claims, ”
and retain[ed] continuing jurisdiction of this action to
address any issues concerning implementation of the
Settlement Agreement and enforcing this Final
Judgment.” ECF No. 67-2. As noted above, the present
lawsuit involves as Plaintiffs some of the class members from
the Lindauer case, as well as the defendant from
Lindauer. These Plaintiffs contend that Defendant
has not paid royalties consistent with the settlement and
court order in Lindauer.
In the
state court Lindauer suit, there is pending a motion
to enforce (in a contempt proceeding) the Lindauer
settlement agreement.
II.
ANALYSIS
The
principal argument in the Motion to Reconsider is that
Younger abstention (Younger v. Harris, 401
U.S. 37 (1971)) does not apply to the facts of this case.
However, although the proposed Intervenors' brief
explains why Younger abstention is
applicable here, Younger was not the basis for my
decision. In my seventeen-page order, I discussed
Younger for roughly one page, and only then because
a cited case had relied on that doctrine.
Rather,
I believed dismissal without prejudice was warranted under a
long line of cases, many that were cited in the original
order, in which one court gives deference to another court
that previously issued a court-ordered settlement or consent
decree resolving a case, when the parties to that prior
resolution are attempting to have its terms interpreted by
some other court. This is not an abstention doctrine,
although in my Order I did reference “abstention
principles.” Order at 2. I now clarify that dismissal
would be appropriate here under principles of comity and wise
judicial administration. For that reason, my original order
was more akin to the doctrine set forth in Colorado River
Water Conservation Dist. v. United States, 424 U.S. 800
(1976). That Court stated:
Although this case falls within none of the abstention
categories, there are principles unrelated to considerations
of proper constitutional adjudication and regard for
federal-state relations which govern in situations involving
the contemporaneous exercise of concurrent jurisdictions,
either by federal courts or by state and federal courts.
These principles rest on considerations of “(w)ise
judicial administration, giving regard to conservation of
judicial resources and comprehensive disposition of
litigation.”
Id. at 817 (citations omitted). The Tenth Circuit
has noted that a Colorado River-type dismissal is
not abstention but rather “an exception to our
jurisdictional mandate from Congress.” Rienhardt v.
Kelly, 164 F.3d 1296, 1303 (10th Cir. 1999).
Incidentally, the Colorado River decision approved
dismissal despite its recognition of the “virtually
unflagging obligation of the federal courts to exercise the
jurisdiction given them.” 424 U.S. at 817 (language
relied upon by the parties in their Motion for
Reconsideration). I cite Colorado River primarily
for the principle that, although to be used only in extremely
unusual cases, there are judicially created exceptions to the
exercise of subject matter jurisdiction. However, as with
Younger abstention, in my original order I did not
intend here to fit my decision squarely into the Colorado
River or any other well-known Supreme Court doctrine.
Rather, it was the doctrine of comity that most clearly
supported the basis for dismissal in the original order.
The
doctrine of comity “teaches that one court should defer
action on causes properly within its jurisdiction until the
courts of another sovereignty with concurrent powers, and
already cognizant of the litigation, have had an opportunity
to pass upon the matter.” Rhines v. Weber, 544
U.S. 269, 274 (2005) (citation omitted). The doctrine
“counsels lower federal courts to resist engagement in
certain cases falling within their jurisdiction.”
Direct Mktg. Ass'n v. Brohl, 135 S.Ct. 1124,
1126 (2015). The cases I cited in support of my original
Order do not generally rely upon abstention, but on
principles of comity. This type of comity is not dependent on
a state-federal dichotomy, but on wise judicial
administration among several jurisdictions. Cases supporting
dismissal which I cited in my original Order involve federal
courts dismissing cases in deference to other federal courts
as well as to state courts, and even state courts attempting
to adjudicate matters contained in federal court orders
approving settlements.[1] The common thread is that the parties in a
prior case resolved their lawsuit with the assistance of the
court (either with a consent decree or a court order adopting
a settlement), which court explicitly retained jurisdiction
(interpreted as intended to be exclusive) over disputes
arising under the resolution. All but one decision cited in
the original Order concluded that deference to the settlement
court was appropriate.
Thus, I
clarify my analysis in the original order as follows: (1)
courts are authorized to retain jurisdiction over settlement
agreements, [2] and (2) when a court has done so, and that
jurisdiction is explicitly (or implicitly under the totality
of circumstances) exclusive, then (3) the doctrine of comity
permits a court, even in the presence of subject matter
jurisdiction, to defer to the settlement court in cases
requiring the interpretation and enforcement of the
settlement agreement. Prior to oral argument concerning the
Motion to Reconsider, I believed this case presented an
appropriately narrow factual situation to qualify as one of
those rare exceptions to the court's “virtually
unflagging obligation” to exercise jurisdiction when it
exists.
Comity
in this context is not an absolute obligation. Petoskey
Inv. Grp., LLC v. Bear Creek Twp., 5:03-CV-14, 2005 WL
1796130, at *9 (W.D. Mich. July 27, 2005). Moreover, I
believe any deferral here ought to rely upon considerations
of wise judicial administration. Moses H. Cone Mem. Hosp.
v. Mercury Constr. Corp., 460 U.S. 1, 14-15 (1983). As
the Supreme Court noted in Moses H. Cone Hosp.,
“the decision whether to dismiss a federal action
because of parallel state- court litigation does not rest on
a mechanical checklist, but on a careful balancing of the
important factors as they apply in a given case, with the
balance heavily weighted in favor of the exercise of
jurisdiction. The weight to be given to any one factor may
vary greatly ...