The opinion of the court was delivered by: Oliver W. Wanger United States District Judge
MEMORANDUM DECISION REGARDING OR IN THE ALTERNATIVE, SEVER PLAINTIFFS' MOTION TO DISMISS, AND STAY DEFENDANTS' COMPLAINT (Docs. 431, 432)
This case is a consolidation of three actions: An action commenced by Plaintiff Fox Hollow of Turlock Homeowners' Association ("Fox Hollow") against Richard Sinclair, Brandon Sinclair, Gregory Mauchley, Lairtrust, LLC, Capstone, LLC, Mauctrst, LLC, and Stanley Flake as Trustee of Capstone Trust, Case No. CV-F-03-5439 OWW/DLB ("Fox Hollow Action"); an action commenced by California Equity Management Group, Inc. ("CEMG") against Mauctrst LLC, Gregory Mauchley, Diana Mauchley, Lairtrust LLC, Richard Sinclair, Deborah Sinclair, Sinclair Enterprises, Inc., Capstone, LLC, Brandon Sinclair, Stanley Flake, and Stanley Flake as Trustee of the F. Hanse Trust and of the Julie Insurance Trust Case No. CVF- 03-5774 OWW/DLB ("CEMG Action"); and an action commenced by Lairtrust LLC, Mauctrst LLC, and Capstone LLC against Fox Hollow, Andrew Katakis, and California Equity Management Group, Inc. in the Stanislaus County Superior Court, Case No. 322675 ("Lairtrust Action"), removed to this Court and consolidated with the Fox Hollow and CEMG Actions by Order filed on October 6, 2003 ("Consolidated Federal Actions").
On August 10, 2010, Defendants Gregory Mauchley, Richard Sinclair, and Brandon Sinclair ("Defendants") filed cross-claims against Plaintiffs. (Doc. 425). Plaintiffs Fox Hollow and CEMG ("Plaintiffs") filed a motion to dismiss, or in the alternative, sever and stay the cross-complaint on September 3, 2010. (Docs. 431, 432). Plaintiffs also filed a motion for more definite statement on September 3, 2010. (Docs. 434, 435).
Defendants filed opposition to Plaintiffs' motion to dismiss or stay the cross-claims on October 25, 2010. (Doc. 443). Plaintiffs filed a reply on November 1, 2010. (Doc. 445).
Defendants' cross-claims assert twenty-seven causes of action against Plaintiffs arising out of various transactions and conduct related to a property development known as Fox Hollow of Turlock ("the Property").*fn1 Defendants unsuccessfully asserted most of their cross-claims in an action filed on April 24, 2003 in the Stanislaus County Superior Court. Judgment was entered against Defendants in the state court action on August 18, 2009, and Defendants filed a notice of appeal of the judgment on October 19, 2009. Resolution of Defendants appeal of the state court judgment is pending in the California Court of Appeal.
Inter alia, Defendants cross-claims allege that Plaintiffs breached a settlement agreement entered into in 2007 relating to the Property, refused to put Lairtrust LLC on the Board of Directors as required by the Conditions, Covenants, and Restrictions (CCR's) applicable to the Property, and refused to effect repairs and landscaping in violation of Plaintiffs duties under the CCR's.
A. Colorado River Doctrine
Plaintiffs seek dismissal or a stay of Defendants' cross-claims based on the Colorado River Doctrine. See Colo. River Water Conservation Dist. v. United States, 424 U.S. 800 (1976). Under Colorado River, considerations of "wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation," may justify a decision by the district court to stay federal proceedings pending the resolution of concurrent state court proceedings involving the same matter. Holder v. Holder, 305 F.3d 854, 867 (9th Cir. 2002) (quoting Colorado River, 424 U.S. at 817)). This doctrine "is a narrow exception to the virtually unflagging obligation of the federal courts to exercise the jurisdiction given them." Smith v. Central Ariz. Water Conservation Dist., 418 F.3d 1028, 1033 (9th Cir.2005) (internal quotation marks omitted).
Colorado River provides a two-part inquiry for determining whether a federal district court should abstain from adjudicating a claim when there is a related state court proceeding. First, the two suits must be parallel; they must involve substantially the same parties litigating substantially the same issues. See Caminiti & Iatarola, Ltd. v. Behnke Warehousing, Inc., 962 F.2d 698, 700 (7th Cir. 1992). The second part of the Colorado River inquiry entails a balancing test. The relevant factors include whether both proceedings involve the same res, the relative inconvenience of the federal forum, the need to avoid piecemeal litigation, the order in which the proceedings were filed, whether state or federal law provides the rule of decision, whether the state action protects the federal plaintiffs' rights, the relative progress of the two proceedings, the presence or absence of concurrent jurisdiction, the availability of removal and the vexatious or contrived nature of the federal claim. See, e.g., Sverdrup Corp. v. Edwardsville Community Unit Sch. Dist. No. 7, 125 F.3d 546, 549-50 (7th Cir. 1997).
Plaintiffs also contend that a stay of the cross-claims is appropriate under Landis v. North American Co., 299 U.S. 248, 254, (1936). When considering a motion to stay, the court weighs a series of competing interests: (1) the possible damage which may result from the granting of the stay, (2) the hardship or inequity which a party may suffer in being required to go forward, and (3) the orderly course of justice measured in terms of the simplifying or complicating of issues, proof, ...