A recent Tennessee Federal District Court case reveals there are exceptions to the Colorado River Doctrine.
The general rule of law stipulates that a litigant cannot simultaneously file suit in both federal and state court when the cases are based on essentially the same facts and issues.
This rule, known as the Colorado River Doctrine, was established by a Supreme Court ruling in Colorado River Water Conservation Dist. V. United States, 424 U.S. 800 (1976).
A recent Tennessee Federal District Court case, Summit Contracting Grp. Inc. v. Ashland Heights LP, 2016 U.S. Dist. LEXIS 60662 (M.D. Tenn. May 6, 2016) indicates there are exceptions to this rule.
Jane Fox Lehman, in an article in Constructlaw.com discusses the Tennessee Federal Court ruling.
The Contractor, Summit Contracting Group, built an assisted living facility for the Owner, Ashland Heights. After completing the project Summit filed suit against Ashland “alleging that [the] Owner had failed to pay Contractor in full for the work it performed; to make timely payments; to provide Contractor a time extension for inclement weather; and to deposit retainage into an interest-bearing escrow account as required by Tennessee’s Retainage Law.”
The Contractor filed a $1.5 million “contract action” in federal court and a $1,074,688.74 mechanic’s lien in state court.
Ashland moved to have the federal action “dismissed without prejudice” citing the Colorado River Doctrine.
The Federal Court ruled against Ashland, stating that the Colorado River Doctrine did not apply because “the Lien Action and the Contract Action similarly involved different issues, different requisites of proof, and different remedies.”
A ruling on the mechanic’s lien issue would not, according to the Court, address or resolve the contract issues raised by the plaintiff.
The lesson here is that it behooves a Contractor to pursue all reasonable remedies regardless of stare decisis. Let the Courts decide whether a particular remedy is merited.
Tennessee Federal District Court Holds That Contractor May Pursue Both Breach of Contract Action in Federal Court and Lien Enforcement Action in State Court, Jane Fox Lehman, Constructlaw.com, August 4, 2016.