Appeals from the United States District Court for the Eastern
District of Louisiana
REAVLEY, SMITH, and OWEN, Circuit Judges.
E. SMITH, Circuit Judge:
Shaw Group ("Shaw") sued Dorsey McCall, its former
employee, in state court for allegedly violating noncompete
and nonsolicitation agreements. After being acquired in part
by Aptim Corporation ("Aptim"), Shaw sought to
dismiss its state action while Aptim pursued a federal-court
action to enforce the arbitration clause in McCall's
employment contract. The federal district court declined to
abstain, it compelled arbitration, and it stayed the
state-court proceeding. We find no error and affirm.
resigned from Shaw in January 2016. He then began working for
an affiliate of Bernhard Capital Partners Management LP and
later became the CEO of Allied Power Management, LLC
("Allied"), a direct competitor of Shaw's.
Believing that McCall had violated the noncompete and
nonsolicitation agreements in his employment contract, Shaw
sued McCall in state court.Those agreements state that
arbitration will occur in New Orleans and that the employer
may file for injunctive relief from a judicial authority
without waiving the right to arbitrate the underlying
15, 2017, Shaw sued in state court, requesting injunctive
relief and damages. The state court issued a Joint Protective
Order. On June 30, Aptim acquired Shaw's
capital services segment, which included the rights to
McCall's employment agreement. Aptim and Shaw moved to
substitute Aptim in the state-court action on July 6, which
McCall opposed on July 10. On July 17, Aptim and Shaw
withdrew their motion for substitution. That same day, Aptim
filed a demand for arbitration with the American Arbitration
Association, and Shaw filed both an amended petition,
deleting its request for damages, and a motion to dismiss the
amended petition with prejudice. McCall filed an opposition
to the motion for voluntary dismissal, an answer to
Shaw's complaint, a reconventional demand, a petition for
declaratory judgment, a motion to consolidate, and a motion
for constructive contempt against Aptim for demanding
arbitration in violation of the protective order, though
Aptim was not then a party to the case.
August 21, Aptim, without Shaw, sued in federal court to
compel arbitration and to stay the state-court proceeding,
seeking arbitration on the same contractual violations that
Shaw had raised in state court: that McCall had breached his
noncompete agreement by working for Allied and his
non-solicitation agreement by poaching fifteen of Shaw's
senior employees. Before the federal court ruled, the state
court on September 1 issued an order joining Aptim in the
state-court action effective June 30 (the day the motion for
substitution had been originally filed); finding that Aptim
and Shaw had waived their arbitration rights by initiating
the state-court action; and granting McCall's motion to
September 19, the federal district court ordered Aptim and
McCall to arbitrate their dispute and stayed the state-court
action as between Aptim and McCall. On September 25, the
court clarified its order to state that all persons and
entities in privity with Aptim and McCall must submit to
arbitration, thus staying the state-court litigation by
McCall against Shaw. On appeal, McCall asserts the federal
district court erred by declining to abstain under
Colorado River Water Conservation District v. United
States, 424 U.S. 816, 817 (1976), erred by compelling
the parties to arbitrate, and violated the Anti-Injunction
Act by enjoining the state-court proceedings.
Colorado River abstention analysis begins with a
heavy thumb on the scale in favor of exercising federal
jurisdiction, and that presumption is overcome only by
"exceptional circumstances." Stewart v. W.
Heritage Ins. Co., 438 F.3d 488, 491 (5th Cir. 2006).
Federal courts have a "virtually unflagging obligation .
. . to exercise the jurisdiction given them." Colo.
River, 424 U.S. at 817. Even so, a court may choose to
abstain, awaiting the conclusion of state-court proceedings
in a parallel case, based on principles of "[w]ise
judicial administration, giving regard to conservation of
judicial resources and comprehensive disposition of
litigation." Id. (quoting Kerotest Mfg. Co.
v. C-O-Two Fire Equip. Co., 342 U.S. 180, 183 (1952)).
to abstain is not a question answered by the recitation of
"a mechanical checklist" but instead rests "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
Mem'l Hosp. v. Mercury Constr. Corp., 460
U.S. 1, 16 (1983). To determine whether exceptional
circumstances are present, the court considers the following
(1) assumption by either court of jurisdiction over a res,
(2) relative inconvenience of the forums, (3) avoidance of
piecemeal litigation, (4) the order in which jurisdiction was
obtained by the concurrent forums, (5) to what extent federal
law provides the rules of decision on the merits, and (6) the
adequacy of the state proceedings in protecting the rights of
the party invoking federal jurisdiction.
Stewart, 438 F.3d at 491. We review for abuse of
discretion the district court's decision whether to
abstain, and we exercise de novo review to the
extent that the decision turns on an interpretation of law.
Black Sea Inv., Ltd. v. United Heritage Corp., 204
F.3d 647, 649-50 (5th Cir. 2000).
asserts that there are exceptional circumstances because the
state court issued a ruling on the question of arbitrability
before the federal court ruled. This case, however, is
subject to the same discretionary balancing of the
Colorado River factors as any other abstention
first factor weighs against abstention. Because this is an
in per-sonam action, there is no res. An
absence of property is not "a merely neutral item, of no
weight in the scales." Instead, it "supports
exercising federal jurisdiction."
second factor is neutral. The relative convenience of the
forums "primarily involves the physical proximity of the
federal forum to the evidence and witnesses."
Evanston, 844 F.2d at 1191. The question requires
finding not that the state court is a "better" or
"more convenient" forum but that the
"inconvenience of the federal forum is so great" as
to warrant abstention. Id. at 1192. "When
courts are in the same geographic location, the inconvenience
factor weighs against abstention." Stewart, 438
F.3d at 492. The state courthouse is in Baton Rouge, and the
federal district court is in New Orleans. Both Allied and
Shaw are headquartered in Baton Rouge, and McCall resides
closer to Baton Rouge than to New Orleans. The 80-mile
distance does not compare to the 300-mile distance in
Colorado River. The two courthouses are within the same
geographic location for all practical purposes. Because
nothing in this case demonstrates that the inconvenience of
the federal forum is "so great, "
Evanston, 844 F.2d at 1191, this factor is neutral
third factor weighs against abstention. Given the strong
federal policy favoring arbitration, the concern about
piecemeal litigation "is not applicable in the
FAA context." Safety Nat'l Cas. Corp. v.
Bristol-Myers Squibb Co., 214 F.3d 562, 565 (5th Cir.
2000). Piecemeal litigation is a different concern from the
worry of obtaining conflicting judgments in parallel actions
involving the same parties and the same questions. The remedy
for conflicting judgments is not abstention, but the
application of res judicata. Kelly Inv., Inc. v.
Cont'l Common Corp., 315 F.3d 494, 498 (5th Cir.
fourth factor, regarding the order in which jurisdiction was
obtained, slightly favors abstention. The inquiry centers
more on the progress made in the relative forums, not on the
date of initial filing. Moses H. Cone, 460 U.S. at
21. If the progress made is just "jurisdictional
posturing" with little progress on the merits, the
factor "weighs against abstention." Black Sea
Inv., 204 F.3d at 651. This factor is difficult to
weigh, as the parties characterize the timeline and progress
quite differently. And it is unusual in our abstention
jurisprudence to confront a case in which the same side filed
both the state and federal actions, though Aptim was not a
party to the state suit when it filed in federal court.
motions were filed in state court before the federal case
began. The state and federal action were filed on June 15 and
August 21, respectively. Aptim was not joined in the state
action until September 1, which was more than a week after it
filed its federal action and was several weeks after it and
Shaw had withdrawn the motion to substitute and Shaw had
attempted to dismiss the suit entirely on July 17.
the number of filings, the state action was not necessarily
progressing. When the federal suit was filed at the end of
August, the state court had not ruled on any of Shaw's
July 17 motions, none of which concerned the merits. Shaw
sought to dismiss before any rulings had been issued and only
one month after filing. In fact, Shaw even sought and was
granted mandamus from the state appellate court ordering the
state trial court to rule on Shaw's motion to dismiss
voluntarily by August 23. The state court denied the
voluntary dismissal on August 24. It was not until September
1 that the state court made any progress.
the federal court compelled arbitration, the state court
issued an order staying the arbitration Aptim had initiated.
Thus, this factor favors arbitration, but only slightly,
considering the complete set of circumstances. Aptim sought
arbitration just weeks after acquiring Shaw, the state court
had made minimal progress when the district court action was
filed, and Aptim was a nonparty in the state-court proceeding
until the state court simultaneously issued the stay and
joined it in the suit.
insists that the fact that the state trial court ruled on
whether arbitration should proceed, and did so before the
federal district court did, should be accorded almost
decisive weight. McCall would be correct if the state trial
court's ruling would be res judicata or would
collaterally estop Aptim. If a state court's ruling would
be given preclusive effect by another court of that state,
then federal courts must also give preclusive effect to that
ruling. If the preclusive ruling is dispositive of
the federal action, then the federal court should abstain and
dismiss because there is no point in proceeding further,
irrespective of the other relevant factors in assessing
abstention under Colorado River.
does not contend that the state court's determination
that Shaw and Aptim waived their rights to arbitrate would be
given preclusive effect by Louisiana courts. In fact, at the
hearing, the federal district court stated "that there
was no final judgment, so neither res judicata nor issue
preclusion applies." McCall did not take issue with that
statement and does not contend that preclusion applies. To
the contrary, in his briefing in our court, McCall opines
that the federal district court's stay of the state court
proceedings "ensur[es] that the state court would never
be able to enter a final judgment entitled to preclusive
effect." Accordingly, the state court's ruling is
not decisive regarding abstention because the state
court's interlocutory ruling regarding arbitration is not
entitled to full faith and credit under the Full Faith and
progress alone "does not give rise to 'exceptional
circumstances' capable of overcoming the strong
presumption in favor of retaining jurisdiction."
Saucier, 701 F.3d at 465. Instead, the federal and
state courts have concurrent jurisdiction, and the state
court was not so far ahead as to counsel the federal court to
stay its hand. Just as we concluded under the third factor,
the solution to inconsistent judgments is through a plea of
res judicata after one court enters a final
fifth factor weighs against abstention. "The presence of
a federal law issue 'must always be a major consideration
weighing against surrender [of jurisdiction], ' but the
presence of state law issues weighs in favor of surrender
only in rare circumstances." Murphy v. Uncle
Ben's, Inc., 168 F.3d 734, 739 (5th Cir. 1999)
(quoting Evanston, 844 F.2d at 1193).
Federal Arbitration Act ("FAA") is the underlying
law and embodies "a liberal federal policy favoring
arbitration agreements, " Moses H. Cone, 460
U.S. at 24, that serves as the backdrop for any FAA
litigation. The FAA itself is an outlier: It created
substantive federal law but not federal-question
jurisdiction. Thus its enforceability is left largely to
state courts. Id. at 25 n.32 ("[A]lthough
enforcement of the [FAA] is left in large part to the state
courts, it nevertheless represents federal policy to be
vindicated by the federal courts where otherwise
appropriate."). This factor, therefore, has less
significance but still weighs against abstention.
Id. at 25-26.
sixth factor, evaluating the adequacy of state proceedings to
protect the rights of the party invoking federal
jurisdiction, can only be neutral or weigh against
abstention. Stewart, 438 F.3d at 493. Nothing has
impugned the state court's ability fairly to determine
the legal questions at issue, so this factor is neutral.
the six factors, two are neutral, one weighs slightly in
favor of abstention, and three weigh against abstention. To
overcome the strong presumption in favor of federal
jurisdiction, a party must show exceptional circumstances.
The factors here do not demonstrate such circumstances, and
the district court was correct to exercise jurisdiction.
points to three out-of-circuit decisions in which the state
court ruled first and the appellate court found abstention
proper. He contends those cases demonstrate that the state
court's issuance of a ruling should be a primary focus of
the abstention inquiry, almost to the point of being
conclusive. In addition to our treatment of this contention
under the fourth factor, we address each of these cases in
Vulcan Chemical Technologies, Inc. v. Barker, 297
F.3d 332 (4th Cir. 2002), suit was filed in the state court,
which compelled arbitration. Arbitration concluded with a
multi-million dollar judgment on the merits against Vulcan,
which sued in federal court to vacate the award. The state
court confirmed the award before the federal court ruled.
Id. at 335. After the federal district court had
vacated the award two months after the state court's
confirmation of it, the Fourth Circuit reversed, finding that
five of the six Colorado River factors favored
abstention and one was neutral. Id. at 341-43.
addition to undertaking the typical six-factor analysis, the
Fourth Circuit noted that the motive for filing in federal
court was critical. Up until the arbitrator entered its
award, Vulcan had "gladly litigated" in state court
and had "gladly arbitrated there before an agreed-upon
arbitrator." Id. at 343. Its federal filing was
merely a "strategy to obtain a second opinion."
same is not true here. In Vulcan, over two years of
litigation and a complete disposition of the merits had
occurred in state court before the federal filing. Aptim
filed in federal court before the state court had done
anything on the merits, so its motive could not have been to
get a second opinion. Instead, Aptim asserted its arbitration
rights on July 17, just weeks after acquiring Shaw.
points next to Preferred Care of Delaware, Inc. v.
VanArsdale, 676 F. App'x 388 (6th Cir. 2017). Based
on the particular facts of the case and the state-law issue
underlying the state-court decision on arbitrability, the
Sixth Circuit affirmed the abstention. The opinion divided
Colorado River's six-factor test into eight
factors and found that the first two weighed slightly against
abstention, five strongly favored abstention, and one was
neutral. Id. at 394-97.
again far different from how the factors play out in the
present case. The Sixth Circuit examined each factor in turn
and did not base its ruling solely on the fact that the state
court issued an order finding the arbitration clause invalid
under state law before the federal court ruled. No state-law
question is at issue here, and the weighing of ...