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Cass River Farms, LLC v. Hausbeck Pickle Co.

United States District Court, E.D. Michigan, Northern Division

October 12, 2016

CASS RIVER FARMS, LLC, Plaintiff,
v.
HAUSBECK PICKLE COMPANY and PRESIDENT TIMOTHY A HAUSBECK, Defendants.

          ORDER GRANTING IN PART MOTION TO DISMISS, STAYING AND ADMINISTRATIVELY CLOSING CASE

          THOMAS L. LUDINGTON, UNITED STATES DISTRICT JUDGE

         On June 20, 2016, Plaintiff Cass River Farms, LLC, (“Cass”) filed a complaint against Defendants Hausbeck Pickle Co. (“Hausbeck”) and Timothy A. Hausbeck, the president of the company. ECF No. 1. The complaint asserts five counts, all related to a contractual dispute between the parties over the delivery of and payment for several large shipments of banana and jalapeño peppers. Compl. at 5-10, ECF No. 1. Counts One, Two, and Three assert that Defendants' rejection of delivery and underpayment under the relevant contracts violated the Perishable Agricultural Commodities Act (PACA), 7 U.S.C. 499(e). Counts Four and Five assert standard breach of contract claims based on the same refusal to accept the deliveries.

         Prior to Cass's filing of this suit, Hausbeck filed a complaint on April 21, 2016, in Saginaw County Circuit Court which named Cass as a defendant and alleged three counts of breach of contract, one count of tortious interference with a business relationship or expectancy, and one count of defamation. Compl. at 11, ECF No. 1. On June 21, 2016, Cass removed that action to federal court. See Hausbeck Pickle Co. v. Cass River Farms, LLC, No. 1:16-cv-12281. On July 21, 2016, Hausbeck filed a motion to remand its suit to state court. On September 3, 2016, this Court granted that motion and remanded the suit to state court.

         On July 22, 2016, Hausbeck filed a motion to dismiss this action, arguing that abstention pursuant to Colorado River Water Conservation Dist. v. United States is appropriate given the separate suit currently pending in state court. 424 U.S. 800 (1976). Because the state court action brought by Hausbeck contests the same material issues as this suit, the Court will stay this action.

         I.

         This case arises out of a series of contracts the parties entered into regarding the sale of large quantities of banana and jalapeño peppers. Cass is a Michigan company that both grows peppers and enters into purchase contracts with peppers grows all over the world. Compl. at 1, 3. Hausbeck is another Michigan company that purchases peppers and then resells them to large-volume consumers, like restaurant chains. Id. at 1, 3. Hausbeck and Cass have a longstanding relationship and have entered into many contracts for the sale of peppers. Id. at 3. Both parties are suing the other in separate actions, each alleging that the other breached several contracts.

         A.

         Cass's claims arise out of alleged breaches of two contracts the parties entered into, Contract 35 and Contract 1019. Id. Cass represents that those contracts created an obligation for Cass to deliver 10.5 million peppers to Hausbeck. Id. Pursuant to Contract 35, Cass contracted to deliver 2 million peppers to Hausbeck at $0.45 per pound. Id. at 4. Under Contract 1019, Cass agreed to provide 8.5 million pounds of peppers to Hausbeck at $0.42 per pound. Id. According to Cass, delivery on Contract 35 was not to begin until after April 1, 2016. Id. On June 9, 2016, Timothy Hausbeck emailed Cass and indicated that Hausbeck would accept only 8.5 million pounds of peppers. Id. at 6. This email reflected Hausbeck's theory that Cass had breached Contract 35 by failing to timely deliver. See Hausbeck Email, ECF No. 1, Ex. 5. Cass argues that the email constituted an anticipatory repudiation of Contracts 35 and 1019. Id. Cass immediately responded, requesting that Hausbeck meet its contractual obligations under both contracts and accept delivery. Id. Cass also notified Hausbeck that it was asserting a claim to full payment under the contracts pursuant to the PACA. Id. When Cass began delivering peppers, Hausbeck accepted only 8.5 million pounds of peppers. Id. at 5-7. Further, Hausbeck paid only $0.42 per pound of peppers that were delivered, consistent with its obligations under Contract 1019 and not Contract 35. Id. Cass is now suing Hausbeck for rejecting delivery and underpaying pursuant to Contracts 35 and 1019 in violation of the PACA. Cass is also bringing common law breach of contract claims against Hausbeck.

         B.

         In the complaint filed in state court, Hausbeck alleges that Cass is the party who breached the contracts between them. Hausbeck Compl., ECF No. 1, Ex. 1. According to Hausbeck, delivery under Contract 35 was to occur during the winter 2016 season. Id. at 3. Delivery under Contract 1019 was to occur between April 20, 2016, and July 7, 2016. Id. at 4. Hausbeck alleges that Cass dramatically undersupplied Hausbeck during the winter 2016 season, which Hausbeck alleges ended on April 30, 2016. Id. at 7. Because Cass breached Contract 35, Hausbeck brought suit in state court on April 21, 2016. Id. at 1, 8-12. Hausbeck alleges that Cass's failure to timely deliver the peppers under Contract 35 resulted in Hausbeck losing a contract with Subway. Id. at 7. Hausbeck argues that it accepted pepper deliveries during the summer of 2016 pursuant only to Contract 1019.

         II.

         Hausbeck has filed a motion to dismiss in this case which asserts that because Cass's claims could be raised in the currently pending state court action, this Court should decline to exercise jurisdiction over this case. The general rule is 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.” McClellan v. Carland, 217 U.S. 268, 282 (1910). See also RSM Richter, Inc. v. Behr Am., Inc., 729 F.3d 553, 557 (6th Cir. 2013) (“The Supreme Court has repeatedly held . . . that the mere pendency of a state-court case concerning the same subject matter as a federal case is not reason enough to abstain.”). However, in Colorado River, the Supreme Court held that abstention by federal courts was justified by the need for judicial efficiency and federal-state comity in some limited circumstances where there was a “contemporaneous exercise of concurrent” jurisdiction by state and federal courts. 424 U.S. at 817. Still, because federal courts have a “virtually unflagging obligation . . . to exercise the jurisdiction given them, ” id., abstention is disfavored. Federal courts should decline to hear a case over which they have jurisdiction only in extraordinary and narrow circumstances where the justification for abstention is clear. Colorado River, 424 U.S. at 813; RSM Richter, Inc., 729 F.3d at 557.

         In order to determine whether the exceptional circumstances necessary to justify Colorado River abstention are present, a court must engage in a two-step inquiry. First, the court must determine whether the state proceeding is truly parallel to the federal case. Crawley v. Hamilton Cty. Comm'rs, 744 F.2d 28, 31 (6th Cir. 1984). The relevant question is not whether the state claim could “be modified so as to make it identical to the current federal claim.” Id. Rather, the issue is whether the cases are currently parallel. Id. “[E]xact parallelism . . . is not required.” Nakash v. Marciano, 882 F.2d 1411, 1416 (9th Cir. 1989). Rather, the two proceedings need only be “substantially similar.” Id. (omitting citations). The parties in the two cases need not be identical. Bates v. Van Buren Twp., 122 F. App'x 803, 806 (6th Cir. 2004). If the state action is broader than the federal action, that only makes it “more likely that it will not be necessary for the federal courts to determine the federal question. Id. at 807. Broadly, the relevant inquiry is whether resolution of the state court action will resolve the contested issues in the federal action. See Baskin v. Bath Twp. Bd. of Zoning Appeals, 15 F.3d 569, 572 (6th Cir. 1994); Wright v. Linebarger Googan Blair & Sampson, LLP, 782 F.Supp.2d 593, 603 (W.D. Tenn. 2011).

         Second, the court must determine whether “judicial economy warrants abstention.” Blakev. Wells Fargo Bank, NA, 917 F.Supp.2d 732, 737 (S.D. Ohio 2013). The ‚Äúdecision 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 ...


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