COLORADO RIVER ABSTENTION WHACK-A-MOLE
A federal court in Iowa heard a motion to dismiss or stay brought by The Samuels Group, Inc., a design/build company who undertook a construction project in Wisconsin. Samuels had entered into a contract with the property owner, Alta Vista Properties, LC, to build a facility on one of its properties. Samuels subcontracted to Hatch Grading & Contracting, Inc. During the course of construction, a tornado destroyed the partially finished project. Hatch asserted a mechanic’s lien against the property to recover payment for the work it had done, and brought an action in state court to enforce the lien. It initially brought in both Alta Vista and Samuels, but ultimately, after various machinations by the parties, agreed to withdraw the petition as against Samuels, as Samuels and Hatch agreed to arbitrate corollary disputes that impacted the mechanic lien issue, and the state court proceedings were stayed. Samuels and Hatch arbitrated, with an award in favor of Hatch. Hatch thereafter sought to bring Samuels back into the state court action to confirm the arbitration award. Samuels filed a petition in federal court to vacate the award on various grounds. Hatch argued that Colorado River abstention applied, and that the action should be dismissed or stayed pending resolution of the state court action. Samuels argued Colorado River did not apply, in part because the FAA created a federal law basis requiring the federal court to maintain jurisdiction, and in part because the parties were not identical in the state court proceeding. The court generally rejected these arguments, noting that the parties were not identical in Colorado River itself, and that Samuels effectively had been part of the state court proceedings at various points. The court nonetheless agreed to maintain jurisdiction, but granted Hatch’s motion to stay the federal action pending the outcome of the state court proceeding. The Samuels Group, Inc. v. Hatch Grading and Contracting, Inc., No. 09-2058 (USDC N.D. Iowa March 23, 2010).
This post written by John Pitblado.
