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Elna Sefcovic, LLC v. Tep Rocky Mountain, LLC

United States District Court, D. Colorado

January 23, 2019

ELNA SEFCOVIC, LLC, JUHAN, LP, and ROY ROYALTY, INC., individually and on behalf of all others similarly situated, Plaintiffs/Counter Defendants,
TEP ROCKY MOUNTAIN, LLC, Defendant/Counterclaimant.



         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 ...

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