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JOHNS v. ROZET

July 14, 1991

Elaine Johns, et al., Plaintiffs,
v.
A. Bruce Rozet, et al., Defendants



The opinion of the court was delivered by: RICHEY

 Before the Court is the defendants' Motion to Dismiss based on the Colorado River doctrine, issue preclusion, and lack of personal jurisdiction. After careful consideration of the defendants' motion, the opposition thereto, the underlying law, and the entire record herein, the Court shall deny the defendants' Motion to Dismiss.

 I. BACKGROUND

 This case has a tortuous history. A related case was filed in March 1987 in the District of Columbia Superior Court. The plaintiffs, low-income tenants in a housing project, the Tyler House, sought redress from their landlords and its management company for allegedly substandard and unhabitable living conditions. Trial was eventually set for June 26, 1989. On the eve of trial, the three owner defendants filed for bankruptcy in California. Plaintiffs were then granted leave to file a second amended complaint naming two affiliates of the bankrupt owner defendants -- the National Investment Development Corporation ("NIDC") and Housing Resources Management, Inc. ("HRM"). Trial was rescheduled for September 12, 1990. In March 1990, the plaintiffs were denied leave to file a third amended complaint adding an additional defendant, the Associated Financial Corporation ("AFC"), a corporate affiliate of NIDC and HRM. One week before trial was to begin, NIDC filed for bankruptcy in California. The next day, defendant Moses removed the case to federal court and moved to transfer venue to California. Judge Jackson remanded the case back to Superior Court and held in abeyance a ruling on the issue of sanctions against the defendant pending completion of the trial.

 On HRM's representations of imminent bankruptcy, the Superior Court again continued the case. By Order of October 3, 1990, denying HRM's motion to reopen discovery on class certification, the court stated:

 
The Court previously advised HRM's counsel in a conference call . . . that the coupling of HRM's settlement offer with its threat of bankruptcy raised questions about the good faith of both of these representations. . . . In short, HRM does not come to this motion with clean hands; under all circumstances, its protestations of concern about the tenant class do not gibe with its continuing actions, which effectively are denying those tenants their day in court.

 The plaintiffs allegedly discovered who had been the true owners of the Tyler House since 1986, and on October 1, 1990, plaintiffs moved to amend their Superior Court complaint to add Mr. Rozet, Mr. Ross, and AFC -- the defendants now before this Court. Judge Taylor denied plaintiffs the opportunity to amend their complaint, in part because she feared it would delay the trial, require reopening discovery, and disrupt intensive mediation. *fn1"

 The plaintiffs then turned to this Court to proceed against Ross, Rozet and AFC. The plaintiffs allege that Ross, Rozet and AFC are the true owners of Tyler House through a web of shell corporations designed solely to insulate the defendants from accountability to their tenants. The plaintiffs claim that the defendants breached the warranty of habitability, were negligent in their operation of Tyler House, and fraudulently promised to repair and maintain the building.

 II. ANALYSIS

 Because the defendants here are not parties in the Superior Court case, *fn2" and the claims against the defendants, including the fraud count, are unique to this action, and because the damages claimed in the two cases cover different time periods, these cases are not parallel actions subject to dismissal under the Colorado River doctrine. Moreover, neither issue preclusion nor lack of personal jurisdiction bar this action.

 A. The Colorado River Doctrine

 In Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 47 L. Ed. 2d 483, 96 S. Ct. 1236 (1976), the Supreme Court articulated what is essentially a type of judicial abstention designed to avoid duplicative litigation. *fn3" The Colorado River doctrine provides that under special circumstances a federal court may decline to exercise its jurisdiction on the ground that there is a parallel action pending in state court which can resolve the controversy. Id. at 818. Arguing that this action and the Superior Court action are essentially the same, the defendants ask the Court to dismiss this case based on Colorado River "abstention." Because the Court finds that the defendants interpret Colorado River too broadly, and in the interests of justice, the Court shall deny the defendants' request.

 Colorado River abstention rests on "considerations of 'wise judicial administration, . . . conservation of judicial resources and comprehensive disposition of litigation'" Colorado River, 424 U.S. at 817 (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co., 342 U.S. 180, 183, 96 L. Ed. 200, 72 S. Ct. 219 (1952)). However, Colorado River did not enervate "the virtually unflagging obligation of the federal courts to exercise the jurisdiction given them." Colorado River, 424 U.S. at 817. The general rule remains that "'the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction . . . .'" Id. (quoting McClellan v. Carland, 217 U.S. 268, 282, 54 L. Ed. 762, 30 S. Ct. 501 (1910)). Given this principle, "the circumstances permitting the dismissal of a federal suit due to the presence of a concurrent state proceeding for reasons of wise administration are considerably more limited than the circumstances appropriate for abstention" and, indeed, are "exceptional." Colorado River, 424 U.S. at 818.

 The Colorado River doctrine rests on a number of considerations, including the desirability of avoiding piecemeal litigation, the inconvenience of the federal forum, whether the state court has assumed jurisdiction over a res, the order in which jurisdiction was obtained by the concurrent forums. See id. In addition, the court may consider the "probable inadequacy of the state court proceeding" to protect the plaintiffs' rights, the relative progress of the litigation in the courts, whether federal law is involved, and the vexatious nature of the litigation. Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 26, 21, 23, 17 n. 20, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983). "No one factor is necessarily determinative; a carefully considered judgment taking into account both the ...


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