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The Federal District Court for the Southern District of Mississippi concluded that there were no exceptional circumstances present which warranted its abstention from hearing a motion to compel arbitration of a claim originally filed in state court.
In Union Sec. Life Ins. Co. v. Starr, No. CIVA 206 CV 41 KS-MTP, 2006 WL 2727991 (S.D. Miss. 2006), Starr, a mentally-disabled, elderly woman was listed as the primary purchaser in the sale of a 2001 Ford truck, although she thought she had been brought in as a co-signer. Also unbeknownst to Starr, credit disability and credit life insurance policies were issued to her by Union Security.
After the truck was repossessed, Starr sued the dealer, the lender, and Union Security in state court. While the state case was pending, Union Security moved to compel arbitration in federal court. Starr moved to dismiss, arguing that the federal court should abstain from hearing the motion because of the pending state court litigation.
Concluding that the arbitration agreement was governed by the Federal Arbitration Act (FAA), the Court applied abstention standards from Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976) “as refined by” Moses H. Cone Mem. Hosp. V. Mercury Constr. Corp., 460 U.S. 1 (1983).
The six Colorado River factors are: (1) assumption by state court over a res; (2) relative inconvenience of the forum; (3) avoidance of piecemeal litigation; (4) order in which jurisdiction was obtained; (5) extent federal law provides the rules of decision on the merits; and (6) adequacy of the state proceedings in protecting the rights of the party invoking federal jurisdiction.
However, “the decision whether to dismiss a federal action because of parallel state-court litigation does not rest on a mechanical checklist, but 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, 460 U.S. at 16.
In applying the factors, the Court held that it was obvious that “no exceptional circumstances existed which [warranted] abstention” and made a point of articulating that its decision did not order arbitration, but “only that the case [would] be allowed to proceed” to decide the motion to compel arbitration in federal court.
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