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McDonald v. Gurson

United States District Court, W.D. Washington, Seattle

August 17, 2017

BRETT MCDONALD, Plaintiff,
v.
BORA GURSON, et al., Defendants.

          ORDER ON MOTION TO DISMISS

          JAMES L. ROBART, UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         Before the court is Defendants Bora Gurson and RoxyCar, Inc.'s (collectively, “Defendants”) motion to dismiss pro se Plaintiff Brett McDonald's complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) and the Colorado River doctrine. (MTD (Dkt. # 5).) The court has considered the parties' submissions, the relevant portions of the record, and the applicable law. Being fully advised, [1] the court denies Defendants' motion.

         II. BACKGROUND

         In January 2017, Mr. McDonald and Mr. Gurson met in Honolulu, Hawaii, at a business seminar related to technology investment. (Compl. (Dkt. # 1) ¶ 11); Gurson v. McDonald, No. C17-0682JLR (W.D. Wash.), Dkt. # 1-2 (“Gurson Compl.”) ¶ 4.[2]According to both parties, Mr. McDonald and Mr. Gurson discussed Mr. Gurson's artificial intelligence software, RoxyCar Technology, which automatically buys and sells cars at auto auctions to generate a profit. (Compl. ¶¶ 11-15); Gurson, No. C17-0682JLR, Gurson Compl. ¶¶ 3-4. Specifically, they discussed a potential role for Mr. McDonald in the company, RoxyCar, Inc. (“RoxyCar”)[3] that was formed to market the software. (Compl. ¶¶ 16); Gurson, No. C17-0682JLR, Gurson Compl. ¶¶ 5, 8. Mr. McDonald signed a confidentiality agreement and attended meetings with potential investors. (Compl. ¶¶ 16, 19-22, 28-30); Gurson, No. C17-0682JLR, Gurson Compl. ¶¶ 5-6, 9. However, the business relationship between the parties rapidly began to deteriorate, and the parties' versions of the events diverge after this point.

         On March 29, 2017, Mr. Gurson filed suit in King County Superior Court against Mr. McDonald and his marital community, alleging breach of contract and tortious interference with business relationships. Gurson, No. C17-0682JLR, Gurson Compl. Mr. Gurson alleges that in early March 2017, his negotiations with Mr. McDonald broke down before they reached an agreement about Mr. McDonald acquiring an ownership interest in RoxyCar. Id. ¶¶ 8, 11-12. Mr. Gurson alleges that Mr. McDonald violated the terms of the confidentiality agreement by disclosing confidential information to another software development company and spoke poorly about Mr. Gurson to potential investors who subsequently refused to invest in RoxyCar. Id. ¶¶ 12-13, 15.

         On April 19, 2017, Mr. McDonald filed a pro se complaint against Mr. Gurson, RoxyCar, and a number of John Doe defendants in this court, alleging breach of contract, unjust enrichment, and promissory estoppel arising out of the same events. See McDonald v. Gurson, No. C17-0619JLR (W.D. Wash.), Dkt. # 1 (“McDonald Compl.”). Five days later, Mr. McDonald removed Mr. Gurson's state court action on the basis that Mr. Gurson's state court claims arise out of the same events. Gurson, No. C17-0682JLR, Dkt. # 1 (“Not. of Removal”). On July 7, 2017, this court granted Mr. Gurson's motion to remand the state action, concluding that supplemental jurisdiction did not provide a basis for removal and that the forum defendant rule barred Mr. McDonald from removing the case. Gurson, No. C17-0682JLR, Dkt. # 15 (“Remand Order”).

         While Mr. Gurson's motion to remand was still pending, the court dismissed Mr. McDonald's complaint against Mr. Gurson without prejudice for lack of subject matter jurisdiction because Mr. Gurson did not adequately allege complete diversity. McDonald, No. C17-0619JLR, Dkt. # 11 (“Order of Dismissal”). Mr. McDonald filed the instant action on May 9, 2017, eliminating the John Doe defendants. (See Compl.) Mr. McDonald alleges that he and Mr. Gurson reached an enforceable agreement that Mr. McDonald would handle all of RoxyCar's operations in exchange for 10 percent of the company. (Id. ¶¶ 17, 154.) Mr. McDonald alleges that Mr. Gurson breached the agreement by firing Mr. McDonald without cause. (Id. ¶ 155.) On May 31, 2017, Mr. Gurson filed the motion to dismiss Mr. McDonald's complaint that is now before the court. (See MTD.)

         III. ANALYSIS

         Mr. Gurson moves to dismiss Mr. McDonald's complaint pursuant to Federal Rule of Civil Procedure 12(b)(1). (See MTD at 1). Mr. Gurson argues that the court should decline to exercise subject matter jurisdiction in deference to the state court proceedings pursuant to the Colorado River abstention doctrine. (See id.); Colo. River Water Conservation Dist. v. United States, 424 U.S. 800 (1976).

         A. Legal Standard

         Rule 12(b)(1) governs the dismissal of a claim at any time prior to final judgment if the court lacks subject matter jurisdiction. See Fed. R. Civ. P. 12(b)(1). A defendant may move under Rule 12(b)(1) for a stay or dismissal of an action pursuant to the Colorado River doctrine. Revolon Monterey Energy LLC v. Peak Operator LLC, No. CV 13-7048 PSG (MRW), 2013 WL 12123689, at *1 (C.D. Cal. Dec. 27, 2013) (citing Equity Lifestyle Props., Inc. v. Cty. of San Luis Obispo, 548 F.3d 1184, 1188 (9th Cir. 2008)).

         Prior to the Supreme Court's decision in Colorado River, federal courts recognized three “extraordinary and narrow exceptions to the duty of a District Court to adjudicate a controversy properly before it.” Colorado River, 424 U.S. at 813 (quoting Cty. of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188-89 (1950)). These abstention doctrines are based on concerns of state-federal comity or avoidance of constitutional decisions. See R.R. Comm'n of Tex. v. Pullman Co., 312 U.S. 496, 501-02 (1943) (recognizing abstention based on the ability of state court determinations of state law to moot federal constitutional issues); Burford v. Sun Oil Co., 319 U.S. 315, 332-33 (1943) (recognizing abstention based on the presence of difficult state law issues involving important public policy concerns); Younger v. Harris, 401 U.S. 37, 41 (1971) (recognizing abstention based on the use of federal jurisdiction to restrain state criminal proceedings). Absent these special and narrow circumstances, the federal courts have a “virtually unflagging obligation” to exercise their jurisdiction, even if an action concerning the same matter is pending in state court. Colorado River, 424 U.S. at 817.

         In Colorado River, the Supreme Court recognized that there are exceptional cases where the three abstention doctrines do not apply, but dismissal of a duplicative federal case in favor of allowing a pending state action to unilaterally proceed is nevertheless appropriate based on considerations of “[w]ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.” Id. at 817 (internal quotation marks omitted and alteration in original). However, the Court cautioned that due to “the absence of weightier considerations of constitutional adjudication and state-federal relations, the circumstances permitting the dismissal of a federal suit due to the presence of a concurrent state proceeding for reasons of wise judicial administration are considerably more limited than the circumstances appropriate for abstention” pursuant to the other three doctrines. Id. at 818.

         The Court “declined to prescribe a hard and fast rule for dismissals of this type, ” but instead identified four factors relevant to whether Colorado River abstention is appropriate: (1) which court first assumed jurisdiction over the property, (2) the inconvenience of the federal forum, (3) the desirability of avoiding piecemeal litigation, and (4) the order in which the concurrent forums obtained jurisdiction. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 15-16 (1983) (citing Colorado River, 424 U.S. at 818-19). In Moses H. Cone, the Supreme Court added two additional factors: (5) whether “federal law provides the rule of decision on the merits, ” and (6) whether the state court proceedings are inadequate to protect the federal litigant's rights. 460 U.S. at 23, 26. The Ninth Circuit subsequently held that courts may consider forum shopping as a seventh factor because “the prevention of forum shopping would promote wise judicial administration.” Am. Int'l Underwriters (Phil.), Inc. v. Cont'l Ins. Co., 843 F.2d 1253, 1259 (9th Cir. 1988). Finally, the Ninth Circuit has clarified that abstention is not warranted unless the federal and state proceedings are sufficiently “parallel.” Nakash v. Marciano, 882 F.2d 1411, 1416 (9th Cir. 1989). This threshold parallelism requirement is not met if there is “a substantial doubt as to whether the state proceedings will resolve the federal action.” Intel Corp. v. Advanced Micro Devices, Inc., 12 F.3d 908, 913 (9th Cir. 1993). If abstention is appropriate, the Ninth Circuit generally requires a stay rather than a dismissal to ensure that “the federal forum will remain open if ‘for some unexpected reason the state forum does turn out to be inadequate.'” Attwood v. Mendocino Coast Dist. Hosp., 886 F.2d 241, 243 (9th Cir. 1989) (quoting Moses H. Cone, 460 U.S. at 28).

         A court's decision to abstain under the Colorado River doctrine “does not rest on a mechanical checklist” of the relevant factors, “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.” Moses H. Cone, 460 U.S. at 16. The relevant factors are “to be applied in a pragmatic, flexible manner with a view to the realities of the case at hand, ” and the “weight to be given to any one factor may vary greatly from case to case.” Id. Ultimately, the court must make “a carefully considered judgment taking into account both the obligation to exercise jurisdiction and the combination of factors counselling against that exercise.” Id. at 15 (quoting Colorado River, 424 U.S. at 818-19). “Any doubt as to whether a factor exists should be resolved against a stay” because only “‘the clearest of justifications'” warrants deference to parallel state proceedings. Travelers Indem. Co. v. Madonna, 914 F.2d 1364, 1369 (9th Cir. 1990) (quoting Colorado River, 424 U.S. at 819).

         B. Parallel Suits

         The threshold question in deciding whether a Colorado River stay is appropriate is whether the federal and state suits are parallel.[4]See T.K. v. Stanley, No. C16-5506BHS, 2017 WL 2671295, at *2 (W.D. Wash. June 21, 2017) (citing Nakash, 882 F.2d at 1415). Mr. Gurson argues that the state and federal proceedings are sufficiently parallel because the parties' claims arise out of the same transaction and occurrence. (See MTD at 7 (“Both lawsuits relate to the same dealings regarding RoxyCar between Gurson and McDonald from January and April of 2017.”).) Mr. Gurson argues that if the court dismisses Mr. McDonald's complaint, the state court proceedings will resolve all of Mr. McDonald's claims because they are compulsory counterclaims in the state court action. (See id.); see also Wash. Super. Ct. Civ. R. 13 (providing that a counterclaim is compulsory “if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim” unless “at the time ...


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