In addition to the declaratory relief sought, the plaintiff also seeks costs and attorneys fees, compensatory and punitive damages, and preliminary and permanent injunctive relief enjoining Hosiery and the Family Trust from transferring in any way their property except to satisfy the plaintiff's judgment. Injunctive relief is also sought against Chemical Bank, to the extent that it may not transfer any of its property in which Somekh, Hosiery or the Family Trust have an interest, despite any such property being pledged, except to satisfy the judgment.
PRESENT MOTION BEFORE THE COURT
The plaintiff moves for the Court to grant preliminary injunctive relief on its behalf. Specifically, the plaintiff moves that the Court enter an order, pending final resolution of this action: (1) enjoining Hosiery from transferring any of its property, except in satisfaction of the judgment held by Bernstein; (2) enjoining the Family Trust from transferring any of its property, except in satisfaction of the judgment held by Bernstein; and (3) enjoining Chemical Bank from transferring to itself or any other person any property in which Hosiery, the Family Trust or Somekh have an interest, whether or not such property is pledged to Chemical, except in satisfaction of the judgment held by Bernstein.
The plaintiff claims that he is entitled to injunctive relief because he has satisfied the two-pronged test for such relief set forth in Jackson Dairy Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979). Bernstein contends that he is likely to succeed on the merits of this action, because of the complete lack of separate corporate identities or formalities of Hosiery and the Family Trust, and the fraudulent nature of the conveyances to those entities by Somekh. Bernstein claims the fraudulent nature of the conveyances is allegedly evidenced by the fact that (i) they were made without fair consideration and rendered Somekh insolvent, (ii) they were made without fair consideration at a time when Somekh was a defendant in actions brought by the Bernsteins to satisfy judgments, and (iii) they were made with the intent to hinder, delay and defraud the Bernsteins as creditors.
Bernstein contends he has met the second prong for injunctive relief, because he is threatened with irreparable harm in that the further dissipation of Hosiery's and the Family Trust's assets will prevent Bernstein from ever recovering on his judgment.
The defendants dispute the plaintiff's contentions, and cross-move for the Court to decline jurisdiction by abstaining from adjudicating this case under the abstention doctrine set forth in Colorado River Water Conservation District v. United States and its progeny. Essentially, the defendants argue that there are parallel state proceedings in which they and the plaintiff are parties, and where the issues presented to this Court have been, or can be, raised by the plaintiff. According to the defendants, a consideration of the six abstention factors under Colorado River militates in favor of this Court's abstaining in this case.
1. The Colorado River Abstention Doctrine.
"Abstention from the exercise of federal jurisdiction is the narrow exception, not the rule," and the federal courts have a "virtually unflagging obligation" to exercise their jurisdiction. Colorado River, 96 S. Ct. at 1244, 1246. Despite this "unflagging obligation" to exercise jurisdiction, the Supreme Court in Colorado River held that abstention by a federal court may be proper in a case where there are parallel state proceedings due to "considerations of 'wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.'" Id., 96 S. Ct. at 1246 (quoted case omitted).
However, because the cases where Colorado River abstention is applicable do not involve issues of constitutional interpretation or federal-state relations, abstention under Colorado River is "considerably more limited" than in circumstances warranting abstention under the various other federal abstention doctrines, where such constitutional and federalism questions are involved. Id.
In sum, abstention under Colorado River is prudential, and is left to the Court's discretion. De Cisneros v. Younger, 871 F.2d 305, 307 (2d Cir. 1989); Alliance of American Insurers v. Cuomo, 854 F.2d 591, 602 (2d Cir. 1988). The mere fact of concurrent state and federal proceedings does not however, without more, warrant abstention. Nor does the mere pendency of an action in the state court bar proceedings concerning the same matter in the federal court having jurisdiction. Colorado River, 96 S. Ct. at 1254-56; Alliance of American Insurers, 854 F.2d at 602.
Rather, "only the clearest of justifications," constituting "exceptional" circumstances, will warrant dismissal under this abstention doctrine. Colorado River, 96 S. Ct. at 1247; Alliance of American Insurers, 854 F.2d at 603; accord Sheerbonnet Ltd. v. American Express Bank Ltd., 17 F.3d 46 (2d Cir. 1994). In order for a district Court to determine whether such "exceptional" circumstances warranting abstention exist, the Supreme Court has identified the following non-exhaustive list of six factors for the district court to consider: (1) assumption by federal or state court of jurisdiction over any res or property; (2) whether the federal forum is any less convenient to the parties than the state forum; (3) whether there is a danger of piecemeal litigation; (4) the order of the two suits; (5) whether federal law provides the rule of decision on the merits; and (6) whether the state court is inadequate to protect the plaintiff's rights. Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 14, 103 S. Ct. 927, 938-41, 74 L. Ed. 2d 765 (1983) (quoting I Colorado River); Alliance of American Insurers, 854 F.2d at 602.
The decision to abstain because of a parallel state proceeding does not rest on mechanically checking to see whether the above factors apply or not. The district court must, instead,
carefully balance the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction. The weight to be given to any one factor may vary greatly from case to case, depending on the particular setting of the case.