Legal Opinions - U.S. District Court, Maryland: January 14, 2008

Daily Record, The (Baltimore), Jan 14, 2008

Civil Procedure

Abstention under Colorado River

BOTTOM LINE: Defendants could not demonstrate abstention under Colorado River was appropriate where concurrent action in state court did not involve identical parties, claims, and requested relief.

CASE: Extra Storage Space, LLC v. Maisel-Hollins Development, Co., et al, RDB-07-2351 (decided Dec. 20, 2007) (Judge BENNET).

FACTS: Extra Storage filed a trademark infringement action against Defendants Maisel-Hollins, Extra Space Management Co. LLC, Annapolis Self Storage Limited Partnership LLP, Silver Spring Extra Space LLC, and Post Management Co. (collectively "Defendants").

Defendants filed a Motion to Stay on abstention grounds in favor of a pending state court action in the Circuit Court for Montgomery County, Maryland, pursuant to Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976).

The background of the case involved two concurrent lawsuits arising out of the parties' desire to use their respective service marks in Maryland. Maisel-Hollins, one of several Defendants in this case, filed a lawsuit against Extra Storage, the lone Plaintiff in the case at bar, and 13 of its affiliates in the Circuit Court for Montgomery County.

In that case, Maisel-Hollins alleged that Extra Space and its 13 affiliates infringed a Maryland-registered service mark, "Extra Space Self Storage" in violation of the Maisel-Hollins's common law and state registration rights. Extra Storage filed an answer and the instant action alleging infringement of its federally registered service mark, "Extra Space Storage".

Extra Space alleged an infringement of its federally registered service mark in violation of Section 32 of the Lanham Act, 15 U.S.C. [section] 1114, common law service mark infringement and unfair competition, false designation of origin arising under Section 43(a) of the Lanham Act, 15 U.S.C. [section] 1125(a), false advertising arising under Section 43(a) of the Lanham Act, id., dilution arising under Section 43(c)(1) of the Lanham Act, 15 U.S.C. [section] 1125(c), and fraudulent registration of its registered service mark under BR [section]1-413. The affiliates of Extra Space were not initially involved in the matter.

Defendants filed their answer in the action and alleged counterclaims against Extra Space and, for the first time, the 13 affiliates that were named as defendants in the state court action. On the same day, the Defendants filed the pending Motion to Stay.

Defendants' Motion to Stay was denied.

LAW: The Defendants' sole contention in their Motion to Stay was that the district court should abstain from hearing the case under the abstention doctrine articulated by the Supreme Court of the United States in Colorado River on the grounds that a duplicative action was also currently pending in the Circuit Court for Montgomery County, Maryland.

In Colorado River, the Supreme Court made clear that the pendency of a similar action in state court did not pose an absolute bar to proceeding with the federal action. 424 U.S. at 817. As a general rule, "our dual system of federal and state governments allows parallel actions to proceed to judgment until one becomes preclusive of the other." Chase Brexton Health Servs., Inc. v. Maryland, 411 F.3d 457, 462 (4th Cir. 2005).

Indeed, federal courts have a "virtually unflagging obligation" to exercise the jurisdiction given to them, Colorado River, 424 U.S. at 817, and "have no more right to decline the exercise of jurisdiction which is given, than to usurp that which is not," Chase Brexton, 411 F.3d at 462.

An "extraordinary and narrow exception" to exercising jurisdiction exists. Colorado River, 424 U.S. at 813. A federal district court may abstain from hearing a case over which it has jurisdiction in "exceptional circumstances where the order to the parties to repair to the state court would clearly serve an important countervailing interest." Id.

The burden for the party seeking a stay in federal court is high: "the task [of the district court] is to ascertain whether there exist 'exceptional' circumstances, the 'clearest of justifications,' ... to justify the surrender of jurisdiction." Moses H. Cone Mem. Hosp. v. Mercury Const. Corp., 460 U.S. 1, 25-26 (1983)

Thus, abstention under Colorado River is appropriate if the district court first determines that the federal and state suits are parallel.

Next, the district court must balance several factors to determine whether the case represents an "exceptional circumstance." Six factors have been identified by the 4th Circuit: "(1) whether the subject matter of the litigation involves property where the first court may assume in rem jurisdiction to the exclusion of others; (2) whether the federal forum is an inconvenient one; (3) the desirability of avoiding piecemeal litigation; (4) the relevant order in which the courts obtained jurisdiction and the progress achieved in each action; (5) whether state law or federal law provides the rule of decision on the merits; and (6) the adequacy of the state proceeding to protect the parties' rights." Chase Brexton, 411 F.3d at 463-64.