395 Lampe, LLC, a Nevada limited liability company et al v. Blixseth
Filing
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ORDERED Ds' #10 Motion to stay in case 3:12-cv-0358 is GRANTED. This action is STAYED pending resolution of the Washington state court action. Ds shall, within 10 days after resolution of that action, file a notice of resolution of the Washingto n state court action and a motion to lift the stay with the court. FURTHER ORDERED that D's # 6 Motion to stay in case 3:12-cv-0385 is GRANTED. This action is STAYED pending resolution of the Washington state court action. Ds shall, w ithin 10 days after resolution of that action, file a notice of resolution of the Washington state court action and a motion to lift the stay with the court. FURTHER ORDERED that Ds' #20 Motion to extend time to file a counterclaim in case no. 3:12-cv-0358 and # 12 Motion to extend time to file a counterclaim in case 3:12-cv-0385 are DENIED. Signed by Judge Larry R. Hicks on 2/12/2013. (Copies have been distributed pursuant to the NEF - DRM)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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395 LAMPE, LLC,
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Plaintiff,
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v.
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DESERT RANCH, LLLP; et al.,
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Defendants.
3:12-cv-0358-LRH-WGC (base)
3:12-cv-0385-LRH-VPC (member)
ORDER
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Before the court is defendants Desert Ranch, LLLP (“Desert Ranch”) and Timothy L.
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Blixseth’s (“Blixseth”) (collectively “defendants”) motion to stay this action, 3:12-cv-0358,
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pending resolution of a similar action filed in the State of Washington. Doc. #10.1 Plaintiff 395
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Lampe, LLC (“Lampe”) filed an opposition (Doc. #26) to which defendants replied (Doc. #29).
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Also before the court is defendants’ motion to extend time to file a counterclaim. Doc. #20.
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Lampe filed an opposition (Doc. #23) to which defendants replied (Doc. #24).
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I.
Facts and Procedural History
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This dispute arises from a complicated series of business transactions between defendants
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and Lampe. In April 2008, defendant Blixseth, a Washington citizen, executed a promissory note
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for ten million dollars ($10,000,000.00) in favor of Lampe. Blixseth then defaulted on the
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promissory note.
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Refers to the court’s docket entry number.
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After default, Lampe, Blixseth and non-party Overlook Partners, LLC (“Overlook
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Partners”) entered into an agreement on May 5, 2008 (“the Note Agreement”). As part of the Note
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Agreement, Blixseth assigned a promissory note from Overlook Partners to Lampe and signed a
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continuing guaranty on that promissory note.
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Ultimately, Lampe did not receive the funds owed and filed the underlying action for breach
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of contract in Nevada state court. Defendant Blixseth removed this action to federal court on the
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basis of diversity jurisdiction. Doc. #1.
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During this same time period, Lampe filed a similar action against Blixseth that was also
removed to federal court, case no. 3:12-cv-0385.2 On December 12, 2012, these actions were
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consolidated with this action, 3:12-cv-0358, as the base case and the second action, 3:12-cv-0385,
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as the member case. Doc. #39.
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At the center of both of these actions is the value of certain membership shares of non-party
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Western Pacific Timber, LLC (“WPT”), an Oregon entity. To secure the various obligations with
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Lampe, Blixseth pledged his 13 percent interest in WPT as part of a pledge agreement. After
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Blixseth’s default on the various notes, Lampe orchestrated the transfer of the WPT membership
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shares from Blixseth’s control to its own. As part of the underlying actions, Lampe seeks a
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determination of the value of the WPT membership shares.
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In response to the present actions, defendants have filed the present motions to stay pending
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resolution of a similar action filed in Washington state court which is also addressing the valuation
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of the WPT membership shares as part of a judicial foreclosure action on certain real property
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owned by Blixseth. See Doc. #10, 3:12-cv-0358; Doc. #6, 3:12-cv-0385.
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In the separately filed and now consolidated second action, 3:12-cv-0385, Blixseth has filed two
nearly identical motions to stay and to extend time. See Doc. #6, 3:12-cv-0385; Doc. #12, 3:12-cv-0385. Thus,
for purposes of this order, the court’s factual and legal findings apply to both actions.
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II.
Legal Standard
In their motions to stay, defendants, relying on Colorado River Water Conservation Dist. v.
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United States, 424 U.S. 800 (1976), argue that the court should stay these actions in light of the
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similar Washington state court action.
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The Supreme Court has determined that under exceptional circumstances, a federal district
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court may decline to exercise or postpone the exercise of its jurisdiction when there are concurrent
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state and federal suits, and when doing so would promote wise and sound judicial administration,
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including the conservation of judicial resources and the avoidance of piecemeal litigation.
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Colorado River, 424 U.S. at 817. This type of abstention from the exercise of federal jurisdiction
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for reasons of judicial economy should be “an extraordinary and narrow exception to the duty of a
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District Court to adjudicate a controversy before it.” Id. at 813; see also, Nakash v. Marciano, 882
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F.2d 1411, 1415 (9th Cir. 1989).
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In order for the court to abstain from exercising jurisdiction under Colorado River, there
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must be a parallel or substantially similar proceeding in state court. Security Farms v. Int’l Broth. of
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Teamsters, Chauffers, Warehousemen & Helpers, 124 F.3d 999, 1009 (9th Cir. 1997) (“[I]nherent
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in the concept of abstention is the presence of a pendent state action in favor of which the federal
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court must, or may, abstain.”). “Suits are parallel if substantially the same parties litigate
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substantially the same issues in different forums.” New Beckley Min. Corp. v. Int’l Union, United
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Mine Workers of America, 946 F.2d 1072 (4th Cir. 1991).
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The Supreme Court and the Ninth Circuit have identified a nonexclusive list of relevant
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factors for determining whether exceptional circumstances exist to justify invoking Colorado River
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abstention. See Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 15-16;
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Nakash, 882 F.2d at 1415-16. These factors include: (1) whether either court has assumed
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jurisdiction over a res, or property at issue; (2) the relative convenience of the forums; (3) the
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desirability of avoiding piecemeal litigation; (4) the order in which the forums obtained
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jurisdiction; (5) whether state or federal law controls; and (6) whether the state proceeding is
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adequate to protect the parties’ rights. See Colorado River, 424 U.S. at 818; Moses H. Cone, 460
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U.S. at 25-26. “These factors are to be applied in a pragmatic and flexible way, as part of a
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balancing process rather than as a mechanical checklist.” American Int’l Underwriters, Inc. v.
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Continental Ins. Co., 843 F.2d 1253, 1257 (9th Cir. 1988).
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III.
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Discussion
The court has carefully examined the Colorado River factors in relation to the
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circumstances of this case and finds that the present actions should be stayed for the sake of wise
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judicial administration. Initially, the court notes that the Washington state action is substantially
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similar to the present federal actions because each lawsuit relates to the same overlapping
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obligations and is connected by the same base pledge agreement of the WPT membership shares.
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See New Beckley Min. Corp., 946 F.2d 1072.
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Further, the court finds that the majority of relevant factors demonstrate that exceptional
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circumstances exist to postpone exercising jurisdiction in this matter until the Washington state
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court action is resolved. First, the Washington court has assumed jurisdiction over certain real
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property located in King County, Washington, as part of the judicial foreclosure action. Second, all
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claims in these actions are brought pursuant to state and not federal law. Third, this court is not a
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better venue than the Washington court to determine the value of the WPT membership shares.
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Finally, staying this action would avoid piecemeal litigation because this court would no longer be
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duplicating the efforts of the state court in addressing the value of the WPT membership shares at
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the time of transfer. See e.g., American Int’l Underwriters, Inc. v. Continental Ins. Co., 843 F.2d
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1253, 1258 (9th Cir. 1988) (“Piecemeal litigation occurs when different tribunals consider that
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same issue, thereby duplicating efforts and possibly reaching different results.”). Therefore, the
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court finds that it would be a misuse of judicial resources to exercise jurisdiction over these
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proceedings until after the Washington state court action has been resolved. Accordingly, the court
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shall grant defendants’ motions to stay.
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IT IS THEREFORE ORDERED that defendants’ motion to stay in case no. 3:12-cv-0358
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(Doc. #10) is GRANTED. This action is STAYED pending resolution of the Washington state
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court action. Defendants shall, within 10 days after resolution of that action, file a notice of
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resolution of the Washington state court action and a motion to lift the stay with the court.
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IT IS FURTHER ORDERED that defendant’s motion to stay in case no. 3:12-cv-0385
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(Doc. #6) is GRANTED. This action is STAYED pending resolution of the Washington state court
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action. Defendants shall, within 10 days after resolution of that action, file a notice of resolution of
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the Washington state court action and a motion to lift the stay with the court.
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IT IS FURTHER ORDERED that defendants’ motion to extend time to file a counterclaim
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in case no. 3:12-cv-0358 (Doc. #20) and motion to extend time to file a counterclaim in case no.
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3:12-cv-0385 (Doc. #12) are DENIED.
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IT IS SO ORDERED.
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DATED this 12th day of February, 2013.
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__________________________________
LARRY R. HICKS
UNITED STATES DISTRICT JUDGE
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