May 09, 2017 Top Story

Appeals Court Won’t Abstain in Battle Between Bishops

Abstention does not apply to ecclesiastical dispute

By Andrew J. Kennedy

A U.S. Court of Appeals has ruled that a battle over who is the bishop of the Protestant Episcopal Church of the Diocese of South Carolina must proceed in parallel state and federal litigation.

Twice before, the U.S. District Court for the District of South Carolina had abstained to allow the case to move forward only in state court. But after the second time, the U.S. Court of Appeals for the Fourth Circuit ruled that abstention did not apply, sending the case into parallel proceedings.

Church Split Leads to Litigation

In 2013, the Diocese of South Carolina and churches loyal to Bishop Mark Lawrence filed suit in South Carolina state court against the Episcopal Church, asserting that the diocese had disassociated with that church. They sought "resolution of their real and personal property rights." They claimed that the Episcopal Church had used the diocese's service marks in violation of state law.

The Episcopal Church attempted to add additional parties, including Bishop Lawrence, but the state court rebuffed those efforts. After a 14-day bench trial, the state court ruled that the Diocese had validly disassociated from the Episcopal Church and therefore owned the property at issue in the litigation, including the service marks. The state court enjoined the Episcopal Church from using the diocese's marks. That case was appealed to the state supreme court where it remains pending.

Bishop vonRosenberg Files Federal Action

Two months after the diocese filed the state court case, Bishop Charles vonRosenberg filed an action in the district court. He claimed that Bishop Lawrence had violated the Lanham Act's false advertising provisions because he claimed to be the bishop of the diocese when he was not.

Bishop Lawrence asked the district court to abstain while the state court case was pending. In August of 2013, the district court agreed. Bishop vonRosenberg appealed to the Fourth Circuit, which reversed the district court on the grounds that the court had applied the incorrect test for abstention. On remand, the district court again abstained, staying the federal case until the state action ended. This appeal followed.

Court of Appeals Focuses on Narrow Grounds to Abstain

The Fourth Circuit first noted that generally speaking, the pendency of a state court action is no bar to federal court proceedings regarding the same matter. In the prior appeal, the Fourth Circuit ordered the district court to apply the abstention test announced by the U.S. Supreme Court in Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976).

In holding that the district court misapplied that test, the Fourth Circuit reasoned that Colorado River requires the court to ascertain whether there exists "exceptional" circumstances or the "clearest of justifications" to justify the surrender of otherwise proper federal jurisdiction. To determine whether exceptional circumstances exist, the court first must determine if the state and federal actions are "parallel." It's not enough that the parties in the state and federal action are aligned in interest—they must be substantially the same parties litigating substantially the same interests.

The appellate court then focused on the exacting "parallel" standard. It reasoned that "the parties involved [must] be almost identical." Even if resolution of the state lawsuit could have a res judicata effect, this is not enough to justify abstention. It also observed that actions are not parallel "if they differ in scope or involve different remedies." Moreover, it reasoned, if there is any doubt that the state action would resolve all of the claims, it would be an abuse of discretion for the district court to abstain.

Different Parties and Claims Destroys Abstention

The Fourth Circuit held that the lawsuits were not duplicative based on two key differences. First, neither Bishop vonRosenberg nor Bishop Lawrence, who were parties to the federal case, were parties to the state action. Second, the Lanham Act claims were not at issue in the state action.

Those differences were enough for the appellate court to hold that abstention was inappropriate. That was true even though the appellate court observed that the state court action could have a collateral estoppel effect in the federal case.

Lessons for Litigators

"This case does have the potential to increase overlapping litigation," observes Brian A. Berkley, Philadelphia, PA, cochair of the Business Torts Committee of the ABA Section of Litigation. "But the Fourth Circuit foreshadowed tools to minimize the impact of duplication. It pointed to res judicata for example, and both res judicata and collateral estoppel can be used to minimize the effect of multiple cases."

Another observer suggests focusing on the initial abstention test. "My advice to litigators is that if you are seeking to have a federal court abstain from exercising jurisdiction based on a parallel proceeding in state court, the fight is likely won or lost when determining which abstention doctrine may apply—as some are more strictly construed and narrowly applied than others," says Robert J. Will, St. Louis, MO, Cochair of the Pretrial Practice & Discovery Committee. "That was certainly the case here," he adds.

"I think the key in this case was that the plaintiff sought both declaratory and non-declaratory relief in the federal litigation," suggests Berkley. "Because the plaintiff sought non-declaratory relief, the more stringent abstention test under Colorado River applied. Had the plaintiff brought only declaratory claims, a looser standard likely would have applied, and thus afforded the district court more discretion to abstain."

 

Andrew J. Kennedy is an associate editor for Litigation News.


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