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September 25, 1986

Petition of ROSENMAN COLIN FREUND LEWIS & COHEN for an Adjudication of its Rights in the Matter of JULIAN SHERRIER, Plaintiff,

The opinion of the court was delivered by: SWEET


The present proceeding is brought by Petitioner Rosenman Colin Freund Lewis & Cohen ("Rosenman") to establish an attorney's lien on a judgment entered in favor of its client, respondent Bernice Richard ("Richard"). Richard has moved for a stay of all proceedings in this matter until final judgment is entered in her malpractice action against petitioner Rosenman, presently in New York Supreme Court. For the reasons stated below, Richard's motion is denied.

 Prior Proceedings

 The prior proceedings and facts of this ongoing controversy are fully set out in this court's decision in Sherrier v. Richard, reported at 564 F. Supp. 448 (S.D.N.Y. 1983) ("the underlying action"), and Petition of Rosenman Colin Freund Lewis & Cohen for an adjudication of its rights in the matter of Sherrier v. Richard, reported at 600 F. Supp. 527 (S.D.N.Y. 1984). Sherrier v. Richard was litigated before this court in October, 1982, with Rosenman acting as counsel for Richard. In May, 1983, Richard brought an action against Rosenman in New York State Supreme Court by serving a summons without complaint seeking damages for breach of contract, breach of fiduciary obligations and negligence. It was removed by Rosenman to this court on May 31, 1983.

 Rosenman then commenced the present proceeding by petition (the "Petition") served and filed on June 17, 1983, seeking to establish an attorney's lien on the judgment entered by this court in Sherrier v. Richard for the amount of its unpaid fees ($270,222.59) and disbursements ($34,750.46) and to enforce its lien against the judgment. On June 27, 1983 Richard served an answer to the Petition which denied that she was liable to Rosenman and raised various affirmative defenses. The answer also stated three counterclaims based on Rosenman's alleged breach of contract, breach of fiduciary relations and fraud in its defense of the Sherrier action, thereby replicating richard's state court claims.

 In January, 1984, Richard voluntarily dismissed her pending state court claim. On May 17, 1984 Richard filed an amended answer which omitted the three counterclaims and added a ninth and tenth affirmative defense. Rosenman moved to strike all affirmative defenses, and on December 21, 1984, this court granted that motion as to all but the eighth affirmative defense, which sought to limit any Rosenman recover to quantum meruit. That defense remained to be employed in the vent that the retainer agreement was found under the cited state authorities to be unenforceable. See 600 F. Supp. 527. The ninth affirmative defense sought an offset for Richard's claims of malpractice and breach, "which are the subject of a separate proceeding." Although the December 21, 1984 opinion regrettably failed to clarify the dismissal of this affirmative defense, there was at the time no separate proceeding and therefore no offset.

 Richard then commenced her present pending malpractice action in New York Supreme Court on June 4, 1985. The complaint states five separate causes of action concerning Rosenman's representation of Richard in the underlying action: (1) negligence or malpractice, (2) breach of contract, (3) breach of fiduciary duty, (4) fraud, and (5) violations of the New York Judiciary Law. Richard seeks damages in excess of $7,500,000. On June 24, 1985, Rosenman removed that action to this court, but Richard then moved to have the case remanded to state court. On September 30, 1985, that motion was granted pursuant to the court's discretionary power to decline to hear issues that would substantially expand the scope of the action into areas of state law. See Richard v. rosenman Colin Freund Lewis & Cohen, 85 Civ. 4859 (S.D.N.Y. October 2, 1985).

 In the state court action, Rosenman moved to make the complaint more definite and to strike certain improper matters and Richard cross-moved to disqualify Rosenman from representing itself pro se. Both motions were denied, but Richard has appealed the denial of her cross-motion to the Appellate Division and has perfected her appeal for the September, 1986 term. In April, 1986, Rosenman moved for a dismissal or stay of the state court action pending the final determination of this action. That motion was argued before the Honorable Walter B. Scheckman of the State Supreme Court on May 22, 1986 and decision is pending.

 Rosenman has not yet answered the complaint in the state court action Richard has made a request for production of documents, but Rosenman has moved of a protective order with respect to that request. The only other discovery documented by the parties in their moving papers are the five depositions taken in the federal court action which, by stipulation, were deemed also taken in the state court action. Richard also states that any document discovery in the federal court action has been deemed by the stipulation to have occurred in the state court action as well. According to Rosenman, that discovery consists of four requests for documents and subsequent production by both parties.


 Two decision of the Supreme Court set forth the standards governing whether a federal court should stay litigation before it in deference to a related action pending in state court. In Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 47 L. Ed. 2d 483, 96 S. Ct. 1236 (1976), the court adopted guidelines for determining when a federal court should dismiss a federal action in favor of a state court action, and in Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983), it held that the same standards should be applied where the remedy sought is a stay rather than dismissal, since "a stay is as much a refusal to exercise federal jurisdiction as a dismissal." Id. at 28.

 In Colorado River, the court addressed the abstention doctrine, under which a district court may decline to exercise or postpone its exercise of jurisdiction:

 (A)bstention is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it. Abdication of the obligation to decide cases can be justified under this doctrine only in the exceptional circumstances where the order to the parties to repair to the State court would clearly serve an important countervailing interest. County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188-89, 3 L. Ed. 2d 1163, 79 S. Ct. 1060 (1958).

 424 U.S. at 813. The court then discussed the three general categories of abstention recognized in its previous decisions: (1) where a "federal constitutional issue . . . might be mooted or presented in a different posture by a state court determination of pertinent state law," id. at 814: (2) where "there have been presented difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar," id., and (3) where "federal ...

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