United States District Court, D. Maryland
RICHARD E. KOZAK, Plaintiff,
CATHALEEN A. CURTISS, et al. Defendants.
JAMES K. BREDAR, District Judge.
Richard E. Kozak brought this suit against Cathaleen A. Curtiss, Kathleen Kernsky Sams, and KS Accounting ("KS") asserting numerous state law claims. The Complaint alleges mismanagement and/or intentional withholding of proceeds owed to Mr. Kozak from the sale of Mr. Kozak and Ms. Curtiss's marital property. Mr. Kozak's poorly drawn Complaint asserts claims for Breach of Contract, Deceptive Trade Practices, Negligence, Common Law Fraud, Intentional or Negligent Misrepresentation, Constructive Fraud, Concealment or Non-disclosure of Material Facts, Aiding and Abetting, Accounting, and Unjust Enrichment. (ECF No. 1.) Now pending before the Court is Ms. Curtiss's motion to dismiss and/or stay the complaint under the Court's discretionary Colorado River abstention power. (ECF No. 6.) The issues have been briefed (ECF Nos. 6, 10, 11), and no hearing is required, Local Rule 105.6. For the reasons set forth below, Ms. Curtiss's motion to stay will be GRANTED.
This conflict is a byproduct of the divorce of Mr. Kozak and Ms. Curtiss ("the divorcees") in 2006, and disagreement arising under their subsequent divorce settlement agreement ("the agreement"), which was incorporated in the divorce decree. (ECF No. 1 at 3.) The divorcees settled child support issues and the distribution of marital property in the agreement. ( Id. ) The agreement provided for liquidation and division of marital assets, and the management and distribution of funds generated by the sale of the marital residence have given rise to the instant lawsuit. ( Id. at 4.) Mr. Kozak resides in Pennsylvania, and Ms. Curtiss resides in New York. ( Id. at 2-3.)
At the time of Mr. Kozak and Ms. Curtiss's divorce, Ms. Sams was the owner and operator of KS Accounting. ( Id. at 3.) The divorcees had been clients of Ms. Sams since 1996, employing her for financial advice and the completion of tax returns. ( Id. ) By all accounts, KS had dissolved by the time this Complaint was filed. ( Id. ) Thus, this memorandum generally refers only to Ms. Sams when discussing work performed by KS. Ms. Sams resides in Maryland, and KS Accounting was based in Maryland during its operation. ( Id. at 3.)
The divorcees sold their home in compliance with the agreement, and hired Ms. Sams "to make distributions to KOZAK and CURTISS from the sale of marital assets." ( Id. at 4.) Proceeds from the sale were to be placed in an escrow account owned by Ms. Sams. ( Id. ) At the time this Complaint was filed, Ms. Curtiss had received $248, 255.68 in payments, and Mr. Kozak had received $0. ( Id. at 5.)
In January, 2014, Ms. Curtiss filed a complaint in the Circuit Court for Charles County (Case Number 08-C-14-000059) ("the state action") against KS, Ms. Sams, and Mr. Kozak. (ECF No. 1-2; ECF No. 6-1 at 2.) The complaint in the state case contains four counts seeking resolution of the question of who is entitled to the disputed proceeds. (ECF No. 1-2 at 6-10.) The state complaint goes on to pray for damages, injunctions, and for an accounting of the escrow account. (ECF No. 1-2 at 6-10.) The state complaint also contains an additional count seeking a declaratory judgment that Mr. Kozak has breached the divorce settlement agreement by failing to make a variety of payments, including payments for child support, the mortgage principal, and property taxes. ( Id. at 10-12.) Ms. Curtiss's complaint in state court has survived motions to dismiss by both Ms. Sams and Mr. Kozak, discovery has begun, and a trial date has been set. Cir. Ct. Charles County, No. 08-C-14-000059, filed January 8, 2014, http://casesearch.courts.state.md.us/inquiry/inquiryDetail.jis?caseId=08C14000059&loc=64&det ailLoc=CC.
Mr. Kozak filed this federal complaint on April 25, 2014. (ECF No. 1.) Like Ms. Curtiss in the preceding state action, in this federal case Mr. Kozak prays for damages, injunctions, and for an accounting of the escrow account. ( Id. at 15.) In addition, Mr. Kozak alleges that Ms. Curtiss, Ms. Sams, and KS Accounting worked together to withhold the payments owed to him, and are thus liable for civil conspiracy. ( Id. at 8-9.)
Ms. Curtiss filed this Motion to Dismiss and/or Stay on May 19, 2014. (ECF No. 6.) Mr. Kozak failed to file a timely response, and instead filed a motion for extension of time (ECF No. 7), which the Court granted, (ECF No. 9). Ultimately, he did respond and the matter has now been fully briefed. (ECF Nos. 6, 10, 11.)
II. LEGAL STANDARD
Federal courts have a "virtually unflagging obligation" to exercise the jurisdiction given to them. Colorado River Water Conservation Dist. v. U.S., 424 U.S. 800, 817 (1976); Barcoding, Inc. v. Genet, 2011 WL 4632575, at *3 (D. Md. 2011). In fact, they "have no more right to decline the exercise of jurisdiction which is given, than to usurp that which is not." Chase Brexton Health Servs. v. Maryland, 411 F.3d 457, 462 (4th Cir. 2005). Unlike most grounds for abstention that are rooted in consideration of federalism, the Supreme Court introduced the doctrine of Colorado River abstention "as a matter of judicial administration." Id. at 462-63 (citing Colorado River, 424 U.S. at 817). The Court recognizes that, under this doctrine, abstention "is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it." Barcoding, 2011 WL 4632575, at *3 (quoting Colorado River, 424 U.S. at 813). Nonetheless, abstention is appropriate "in the exceptional circumstances when a federal case duplicates contemporaneous state proceedings and wise judicial administration... clearly favors abstention." Vulcan Chem. Techs., Inc. v. Barker, 297 F.3d 332, 340 (4th Cir. 2002). If such circumstances do exist, then the decision whether to exercise jurisdiction is committed to the sound discretion of the district court. See Chase Brexton Health Servs., 411 F.3d at 463.
This case epitomizes the exceptional circumstances for which the Colorado River abstention doctrine was conceived. The Court recognizes its duty to exercise the jurisdiction which it holds, and has previously cautioned that this type of motion must satisfy the "high bar for abstention that has been set by the Supreme Court and the Fourth Circuit." Barcoding, 2011 WL 4632575, at *6. Indeed, though the parties have collectively failed to cite any Fourth Circuit precedent, the Court recognizes that Colorado River abstention is disfavored in this Circuit. Federal courts should decline to abstain especially where a party risks losing a proper forum to adjudicate claims. See Chase Brexton Health Servs., 411 F.3d at 464 (noting that abstention may risk depriving parties "of the opportunity to litigate their claims"). That said, the present facts are exceptional and there is no risk that any party will lose a proper forum.
Colorado River abstention begins with a threshold inquiry about whether "parallel" suits are pending in state and federal court. Great Am. Ins. Co. v. Gross, 468 F.3d 199, 207 (4th Cir. 2006). "Suits are parallel if substantially the same parties litigate substantially the same issues in different forums." New Beckley Mining Corp. v. ...