to proceed in federal court would pose a risk of inconsistent and contradictory results. See De Cisneros, supra, 871 F.2d at 308. The danger of inconsistent results is increased by the Court's belief that Bull & Bear's reimbursement action is not barred by the doctrine of res judicata. Thus, were the Court to retain jurisdiction, it would grant partial summary judgment in favor of the plaintiff with respect to liability for collection costs, leaving defendant's counterclaims, which are the subject of two actions in the New York Supreme Court, as the only issues remaining in this case beyond assessment of the expenses incurred in collection on the Note.
The Court next observes that Fuller is correct in his assertion that the instant action is the only case between the parties concerning collection costs. However, the ultimate measure of damages in this action is "inextricably linked," General Reinsurance Corp. v. CIBA-Geigy Corp., 853 F.2d 78, 81 (2d Cir. 1988), to the resolution of defendant's counterclaims, which are also pending before the state court. Moreover, "if a district court has the power to dismiss an action on the grounds of abstention it has the power to remand to the state court on those grounds." Corcoran, supra, 842 F.2d at 36. By remanding, the Court can transfer this case back to state court for consolidated treatment with the other actions implicating Fuller's counterclaims, allowing joint treatment of all of the remaining issues in this case and eliminating the risk of inconsistent results.
The fourth factor that must be considered in determining whether abstention is appropriate is the temporal sequence in which the various actions were filed. Where parallel actions are pending in state and federal court, but neither action has made substantial progress, this factor bears relatively little weight. See General Reinsurance, supra, 853 F.2d at 82. However, consideration of the universe of actions between these parties reveals that the state courts have been involved in this controversy for far longer than the federal action has been pending. Justice Altman has been involved in the dispute between the parties for almost four years, and Fuller's counterclaims in the instant case appear to have been raised, in the first instance, in the 1988 Action. Further, the fact that the instant case is related to more than one state court action militates in favor of abstention. See Telesco v. Telesco Fuel and Masons' Materials, Inc., 765 F.2d 356, 363 (2d Cir. 1985).
While the third and fourth factors point toward the conclusion that this is an appropriate case for abstention, the fifth factor, concerning the source of the rule of decision, is the decisive factor in this case. Given that state law controls in all diversity actions, the mere presence of an issue of state law is not sufficient to justify Colorado River abstention. See Bethlehem Contracting, supra, 800 F.2d at 328. Nevertheless, "although the absence of federal issues does not require the surrender of jurisdiction, it does favor abstention where 'the bulk of the litigation would necessarily revolve around the state-law . . . rights of [the] . . . parties." General Reinsurance, supra, 853 F.2d at 82 (quoting Moses H. Cone, 460 U.S. at 23 n.29). The case at bar implicates primary issues of state law with respect to contractual interpretation and the proper sequence of actions for recovery on a promissory note. Moreover, the law in this area is particularly unsettled, and Fuller's assertion that "379 Madison Avenue was overruled because the Court of Appeals says it is [sic]," Defendant's Response, at 11, simply overlooks the ambiguity that currently exists.
This action does not involve a complex state regulatory apparatus like that implicated in Corcoran, supra, 842 F.2d at 37. Nevertheless, the absence of controlling authority in this area indicates that this suit involves "a novel state law theory." Telesco, supra, 765 F.2d at 363. Moreover, the confusion regarding the proper interpretation of state law convinces the Court that this case "would best be determined in a setting lending itself to prompt review by New York's appellate courts." Young v. United States Department of Justice, 882 F.2d 633, 644 (2d Cir. 1989), cert. denied, 493 U.S. 1072, 107 L. Ed. 2d 1023, 110 S. Ct. 1116 (1990). Especially compelling is the fact that "deferral by the federal court [will] guarantee that it will not misinterpret New York law." De Cisneros, supra, 871 F.2d at 309.
Finally, the Court turns to the sixth factor, the protection of the rights of the party seeking to proceed in federal court. Where a litigant faces a threat of prejudice by being required to proceed in state court, this factor weighs heavily in favor of the exercise of jurisdiction. See De Cisneros, supra, 871 F.2d at 309; Bethlehem Contracting, supra, 800 F.2d at 328. However, if the case at bar is remanded to the state court, all of the claims between the parties will be heard in one forum, reducing the risk of inconsistent results and allowing for a comprehensive resolution of this conflict before a court that is familiar with these parties and that is particularly well situated to resolve the open issue of New York law. See General Reinsurance, supra, 853 F.2d at 82 (abstention favored where all issues are joined in state court action). Moreover, Fuller has conceded that he will not suffer prejudice by proceeding in state court. See Defendant's Response, at 21. The Court therefore finds that the sixth factor weighs neither in favor of nor against abstention.
Based upon this factor analysis, the Court holds that this is an appropriate case for Colorado River abstention. Given the strong presumption in favor of the exercise of federal jurisdiction, this is not a decision that is taken lightly. Nevertheless, the long state court history of this series of actions, the existence of parallel actions posing the threat of inconsistent results and the pendency of an unresolved issue of controlling state law convince the Court that this is one of those exceptional cases where interests of "conservation of judicial resources and comprehensive disposition of litigation," Colorado River, supra, 424 U.S. at 817, militate in favor of abstention.
For the foregoing reasons, the Court hereby abstains from the exercise of its jurisdiction pursuant to the principles set forth in Colorado River. This action is hereby remanded to the Supreme Court of the State of New York, New York County.
Dated: March 17, 1992
New York, New York
Peter K. Leisure