Court Found that the State Action Did Not Resolve all of the Claims in the Federal Case and Thus There Was Not Possibility of Abstention under Colorado River Doctrine

Glassie v. Douchette, 2022 WL 17412856, __4th __, (1st Cir., Dec. 5, 2022). 

Court Found that the State Action Did Not Resolve all of the Claims in the Federal case and thus There Was Not Possibility of Abstention under Colorado River Doctrine

Georgia Glassie, a daughter of decedent Donelson Glassie, brought suit in the federal district court for the District of Rhode Island advancing the claim that defendants Doucette, Taft, and Thomas are liable to her under the federal “RICO” laws, 18 U.S.C. § 1962.  In support of that claim, she alleges that those defendants formed an enterprise that engaged in a pattern of fraudulent interstate communications in negotiating and obtaining bank loans.

Second, Georgia alleged that in their capacity as managing members of Historic Inns, all defendants breached fiduciary duties owed to her as a minority member of the LLC by surreptitiously entering a loan transaction that effectively transferred value away from Georgia and to the favored beneficiaries.

Third, Georgia alleged that Doucette (as executor) breached fiduciary duties owed to Georgia (as a beneficiary) by engaging in transactions designed to favor other beneficiaries to her detriment and by concealing and misrepresenting facts concerning his actions as executor.

Fourth, Georgia alleged that all defendants breached the Operating Agreement for Historic Inns by causing Historic Inns to borrow money without following the proper procedures, and by amending the Operating Agreement without a meeting or consent of non-managing members.

Fifth, Georgia alleged that all defendants negligently omitted and/or misrepresented information regarding the actions they took in securing the Historic Inns loan and amending the Historic Inns Operating Agreement.

Sixth, Georgia alleged that all defendants committed fraud by failing to disclose the actions they took in securing the Historic Inns loan and amending the Historic Inns Operating Agreement.

Seventh, Georgia alleged that all defendants engaged in a civil conspiracy to unlawfully benefit themselves by taking actions that harmed Georgia’s interest in the estate but increased the value of businesses in which defendants and the favored beneficiaries held a greater interest.

As relief, Georgia sought monetary damages against Doucette, Thomas, and Taft, all in their personal capacities, plus attorneys’ fees in connection with the RICO claim under 18 U.S.C. § 1964(c).

The district court dismissed all of Georgia’s claims as barred by the probate exception to federal court jurisdiction. The court reasoned that determining the harm Georgia suffered from the defendants’ wrongful acts would require an accounting of the estate, and that granting her relief on some of her claims would require replacing the executor.

The Court considered a question of abstention about which the parties filed supplemental briefs.  Under the doctrine established in Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), a federal court may abstain in certain instances where there is a parallel state court proceeding, “based on ‘considerations of wise judicial administration’ that counsel against duplicative lawsuits.” Jiménez v. Rodríguez-Pagán, 597 F.3d 18, 27 (1st Cir. 2010) (quoting Colorado River, 424 U.S. at 817, 96 S.Ct. 1236). As mentioned, Donelson’s estate remains in Newport probate court. According to the parties, Georgia and her mother filed a petition with the probate court to remove Doucette as executor based on his breach of fiduciary duty; that petition was denied by the probate court, and the denial was appealed to the Rhode Island Superior Court. The probate court also denied a petition filed by Georgia and her mother to adjudge Doucette in contempt for failing to render inventory and account, leading to another appeal to the superior court. The probate court also found unripe a petition Georgia filed to prohibit the disbursement of estate funds to pay Doucette and the favored beneficiaries’ legal fees. Thomas, a defendant in this case, has also filed petitions in the probate court seeking a distribution of estate assets to him.

This federal lawsuit clearly covers much ground in common with these ongoing state court proceedings. But some duplication alone is not enough to justify a stay of this federal action; “[t]he crevice in federal jurisdiction that Colorado River carved is a narrow one,” and abstention must be approached with “caution” and granted only where there is the “clearest of justifications.” Id. (internal quotations omitted). As a threshold matter, a stay or dismissal of a federal lawsuit under Colorado River “necessarily contemplates that the federal court will have nothing further to do in resolving any substantive part of the case.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 28, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). For this reason, “it would be a serious abuse of discretion to grant [a] stay or dismissal at all” “[i]f there is any substantial doubt” “that the parallel state-court litigation will be an adequate vehicle for the complete and prompt resolution of the issues between the parties.” Id. In short, to create the possibility of abstention under Colorado River, the federal- and state-court cases must be “sufficiently parallel,” Villa Marina Yacht Sales, Inc. v. Hatteras Yachts, 947 F.2d 529, 533 (1st Cir. 1991); that is, the state action must resolve all of the claims in the federal case.

Here, there was substantial doubt that the state-court actions will resolve all of Georgia’s federal claims. For example, even if Georgia were to lose in state probate court on all of her claims relating to Doucette’s conduct as executor, that would not dispose of her claim that some or all of the defendants breached duties owed to her as managers of Historic Inns, since that corporate governance dispute is based on her status as a member of the LLC rather than as a beneficiary of the estate. Likewise, even if Georgia prevails on all claims in the state courts, it is unlikely that any state court in so ruling will have occasion to consider whether a RICO enterprise existed, or whether the three defendants committed bank fraud as alleged in Georgia’s federal RICO claim.

Indeed, not even the defendants contend that the state-court claims will resolve all the federal-court claims. Doucette argues, instead, that we should abstain because Georgia could bring her RICO claim in state court. But if that were sufficient to invoke abstention, abstention could become the rule, rather than the exception, except in actions impacting exclusive federal jurisdiction. See Jiménez, 597 F.3d at 29 

In sum, the Court had substantial doubt that resolution of the state-court actions will provide a vehicle for the “complete” resolution of the issues between the parties, and therefore found that the case for Colorado River abstention did not even get to first base.


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