The opinion of the court was delivered by: POLLAK
The present case revolves around a contract dispute between two firms, Allied Nut and Bolt Co., Inc. ("Allied"), a Pennsylvania corporation with its principal place of business in Pennsylvania, and NSS Industries, Inc. ("NSS"), a Michigan corporation with its principal place of business in Michigan. Allied's complaint was filed on July 18, 1995. The complaint was brought under this court's diversity jurisdiction; it makes claims of breach of contract and misrepresentation against NSS, and seeks in excess of $ 50,000 in damages. Now before the court is a motion to dismiss, or in the alternative for a stay, by NSS. NSS's motion points out that, on June 15, 1995, NSS filed a suit against Allied in state court in Wayne County, Michigan, that was based upon the same sequence of events, and requests that this court, pursuant to Colorado River Water Conservation District v. United States, 424 U.S. 800, 47 L. Ed. 2d 483, 96 S. Ct. 1236 (1976), decline to exercise jurisdiction over the present case.
The following recitation of facts is drawn from Allied's complaint (with certain exceptions, which are noted as they arise).
"In or about" January of 1990, Allied and NSS entered into an agreement under which Allied agreed to purchase all of its needs for domestically fabricated rapid tension bolts, washers, and nuts (which the complaint terms collectively "domestic rapid tension fasteners," and which I will call simply "fasteners") from NSS. Complaint, P 5. In exchange, NSS agreed (1) to give Allied a 26% discount from its list price, a substantial cost savings to Allied; (2) to supply all of Allied's needs for fasteners; and (3) not to sell fasteners to any other distributor in Metropolitan New York, New Jersey, Pennsylvania, Delaware, and Maryland (to which the parties later added "three accounts in the New England states," Complaint, P 6). Allied then terminated its purchase of the relevant type of fasteners from all other suppliers, and "expended time and effort in advertising its relationship with NSS," Complaint, P 8.
Business relations between the parties then proceeded to deteriorate. "Almost from the beginning," Allied claims, it experienced "some difficulty" in receiving fasteners on time from NSS. Complaint, P 9 By 1994, this had become a routine failure by NSS to ship product as ordered. NSS told Allied, variously, that it could not obtain raw materials, that the manufacture of fasteners was unprofitable, and, finally, that it was ending production of fasteners. Because of these difficulties, the dollar value of fasteners received by Allied from NSS, which had averaged $ 250,000 a year for 1991, 1992, and 1993, dropped to $ 100,000 in 1994. Allied therefore canceled some outstanding orders and contacted another fastener manufacturer. Because Allied had previously ended its dealings with that manufacturer (pursuant to Allied's agreement with NSS), the manufacturer was unwilling to give Allied any discount from list price. As a result, Allied's competitiveness suffered.
Since that time, Allied's complaint alleges, Allied has learned that NSS had not, as it claimed, gone out of the fastener business. Indeed, Allied alleges that it believes that NSS has sold fasteners to other distributors in the territory for which Allied had been NSS's exclusive distributer. Accordingly, on July 18, 1995, Allied filed a complaint in the Eastern District of Pennsylvania seeking damages for breach of contract and intentional misrepresentation.
Allied was not, however, the first to sue. On June 15, 1995, NSS filed suit against Allied in state court in Wayne County, Michigan. NSS's complaint in that action asserts that NSS began selling fasteners to Allied in 1990; that NSS has presented a statement of account to Allied; and that Allied presently owes NSS $ 15,581.77, plus interest and costs.
NSS's complaint seeks to recover on theories of breach of contract, account stated, quantum valebant, unjust enrichment, and promissory estoppel. The complaint also seeks a declaratory judgment as to whether NSS has any continuing obligations to provide goods to Allied.
Allied filed an answer in the Michigan proceeding denying that Allied owed any amount to NSS. The answer also presents a series of defenses, including claims (1) that NSS's claims are barred because NSS misrepresented material facts, (2) that NSS committed the first material breach, and (3) that Allied "is entitled to a set-off and/or recoupment due to Plaintiff's breach of contract and/or misrepresentation of material facts." Motion to Dismiss, exh. 5.
Two further events have occurred in the Michigan proceeding that are relevant here. First, the Michigan court has entered a form scheduling order (it is unclear on precisely what date it did so) which scheduled, among other things, an exchange of witness lists for December 7, 1995 and a discovery cutoff for January 25, 1996. Motion to Dismiss, exh. 4. Second, after hearing oral argument on September 15, 1995, the Michigan court granted a motion by Allied to dismiss NSS's declaratory judgment claim with prejudice.
However, the Michigan court, in a later order, granted a motion by NSS seeking clarification of the previous order, and stated that the previous order "shall not act as a bar to NSS raising any defenses in this or any other pending case concerning the subject matter of the dismissed Count."
NSS now seeks dismissal of this action (or, in the alternative, a stay) under the Colorado River doctrine. That case permits a federal court, in "exceptional" circumstances, to stay or dismiss a case over which it would otherwise have jurisdiction for reasons of "wise judicial administration," including "conservation of judicial resources and comprehensive disposition of litigation." Id. at 818-19. There is, however, a strong presumption against the application of this doctrine, as the federal courts have a "virtually unflagging obligation . . . to exercise the jurisdiction given them." Colorado River, 424 U.S. at 817. The Colorado River Court was careful to avoid calling the doctrine that it applied one of abstention; courts applying the Colorado River doctrine have not always been so circumspect, however, see, e.g., Trent v. Dial Medical of Florida, Inc. 33 F.3d 217, 223 (3d Cir. 1994). I will occasionally refer to Colorado ...