Snead et al v. Wright et al

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UNITED STATES DISTRICT COURT
DISTRICT OF ALASKA
MONIQUE R. SNEAD, Individually and)
as Personal Representative of the )
Estate of John H. Snead; JOHN G. )
SNEAD, Individually and as Trustee )
of the Snead Irrevocable Trust; )
MONIQUE R. SNEAD and JOHN G. )
SNEAD, both individually and as )
beneficiaries of the John H. Snead )
Revocable Trust and the Snead )
Irrevocable Trust, )
)
Plaintiffs, ) 3:19-CV-00092 JWS
)
vs. ) ORDER AND OPINION
)
) [Re: Motion at Doc. 15]
GUADALUPE C. WRIGHT; and )
MERRILL LYNCH, PIERCE, FENNER )
& SMITH INCORPORATED, )
)
Defendants. )
)
I. MOTION PRESENTED
At docket 15 Defendant Guadalupe C. Wright (Wright) moves for a stay of this
federal action pending resolution of a state court case, Alaska Superior Court Case
No. 3AN-17-09177, pursuant to the Colorado River state court deference doctrine.1
Plaintiffs Monique R. Snead and John G. Snead, in their various capacities (collectively
Plaintiffs or the Sneads), oppose the request at docket 23. Wright replies at docket 26.
Oral argument was requested but denied as unnecessary.
1Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817-19 (1976).
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II. BACKGROUND
In September of 2017, Monique Snead filed a complaint against Wright in
Superior Court for the State of Alaska. She filed as the personal representative of the
estate of her father, John H. Snead. John H. Snead had been in a long-term
relationship with Wright up until his death on August 7, 2017. The state court complaint
against Wright alleges that leading up to her father's death, when he was "in poor
health" and "not competent to make financial or legal decisions," Wright took property
that belonged to John H. Snead and unduly influenced or coerced him to transfer
ownership of property to her.2 It also alleges that Wright unlawfully transferred funds
without authority from accounts belonging to John H. Snead, his estate, and the Snead
Irrevocable Trust—a Merrill Lynch trust account pursuant to which Monique Snead and
her brother, John G. Snead, were beneficiaries, with John G. Snead as the trustee. The
state court complaint raised a claim for conversion of property, including the money in
the trust, and a claim for undue influence.3
The parties exchanged discovery. As part of the discovery process Monique
Snead, in her representative capacity, provided responses to Wright's interrogatories
and requests for production. As part of her response to an inquiry about the basis for
her undue influence claim, Monique Snead indicated that Wright had coerced her father
to withdraw funds from her father's Merrill Lynch revocable trust account, the John H.
Snead Revocable Trust and the Snead Irrevocable Trust account.4 Monique Snead
also issued a Rule 30(b)(6) deposition notice to Merrill Lynch and indicated that she was
seeking information about her father's various trust accounts and withdrawals made
from those accounts.5 She requested information about Wright's employment with
2Doc. 16-2 at p. 2, ¶ 6.
3Doc. 16-2 at pp. 3-4.
4Doc. 16-3.
5Doc. 16-4.
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Merrill Lynch and information about Wright's position with the company in relation to
John H. Snead's accounts.
In the Spring of 2018, the parties litigated an attorney-client privilege issue in
state court.6 Wright argued that the attorney-client privilege should be waived in relation
to certain communications between John H. Snead and his attorneys. The court found
in Wright's favor and granted her request for attorneys' fees in connection with the
motion. Monique Snead filed a motion for reconsideration, but the request was denied.
A few months later, Monique Snead filed an offer of judgment for $10,000.7 She
later filed a "Notice to the Court Regarding Pending Settlement" wherein she informed
the state court that the parties had reached an agreement to settle the case and were
formalizing the settlement paperwork.8 The final agreement drafted by her counsel
stated that the settlement covered all claims raised between the parties. The parties
agreed not to file any further lawsuits or other proceedings or make any demands
involving or relating to any of the claims, although the agreement reserved any claims
that the Sneads had against Merrill Lynch.9 The parties, however, never signed the final
paperwork. Instead, counsel indicated that Monique Snead and her brother wanted to
proceed with litigation.10
In April of 2019, Monique filed the current federal lawsuit against Wright and
Merrill Lynch. Rather than filing just as the personal representative of her father's
estate, she also filed individually and as the beneficiary of the John H. Snead Revocable
Trust and the Snead Irrevocable Trust. Her brother, John G. Snead, was also included
as a plaintiff— individually, as the trustee of the Snead Irrevocable Trust, and as
6Dos. 16-6, 16-7, 16-8.
7Doc. 16-9.
8Doc. 16-10.
9Doc. 16-11.
10Doc. 16-12.
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beneficiary of the two trusts. The federal lawsuit includes one claim against Wright,
alleging she wrongfully removed funds from the trusts. The other claims are brought
against Merrill Lynch wherein the Sneads allege that Merrill Lynch breached its fiduciary
duty regarding the trusts, that it is vicariously liable for the actions of Wright, and that it
was negligent in hiring, training, and supervising Wright.
III. STANDARD OF REVIEW
Defendant Wright requests that the federal claim for undue influence against her
be stayed pending the concurrent and parallel state court action against her. She
argues that a stay is warranted under the Colorado River doctrine, which is "a form of
deference to state court jurisdiction"11 that may be applied when "traditional abstention
principles do not apply, yet considerations of wise judicial administration, giving regard
to conservation of judicial resources and comprehensive disposition of litigation,
nonetheless justify a decision to stay or dismissal of federal proceedings pending
resolution of concurrent state court proceedings."12 The circumstances in which the
doctrine should be applied, however, are "exceptional" and "rare."13 The doctrine is a
"narrow exception to the virtually unflagging obligation of the federal courts to exercise
the jurisdiction given them."14
A precondition to the application of the Colorado River doctrine is that the state
and federal claims be "substantially similar."15 "Exact parallelism" is not required.16 It is
11Coopers & Lybrand v. Sun-Diamond Growers of CA, 912 F.2d 1135, 1137 (9th Cir.
1990).
12Smith v. Cent. Ariz. Water Conservation Dist., 418 F.3d 1028, 1032-33 (9th Cir. 2005).
13R.R. St. & Co. Inc. v. Transp. Ins. Co., 656 F.3d 966, 977-78 (9th Cir. 2011).
14Smith, 418 F.3d at 1033 (internal quotation marks omitted).
15Seneca Ins. Co. v. Strange Land, Inc., 862 F.3d 835, 845 (9th Cir. 2017).
16Nakash v. Marciano, 882 F.2d 1411, 1416 (9th Cir. 1999).
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sufficient if the "same relevant conduct" and "same pertinent parties" are involved.17 If
the claims are substantially similar, courts must consider eight different factors to
determine whether the circumstances warrant a stay:
(1) which court first assumed jurisdiction over any property at stake; (2) the
inconvenience of the federal forum; (3) the desire to avoid piecemeal
litigation; (4) the order in which the forums obtained jurisdiction; (5) whether
federal law or state law provides the rule of decision on the merits;
(6) whether the state court proceedings can adequately protect the rights of
the federal litigants; (7) the desire to avoid forum shopping; and (8) whether
the state court proceedings will resolve all issues before the federal court.18
"These factors are to be applied in a pragmatic and flexible way, as part of a balancing
process rather than as a mechanical checklist."19 Some factors may not apply, and
"doubt as to whether a factor exists should be resolved against a stay.20
IV. DISCUSSION
A. Substantial Similarity
The claims against Wright in state court are substantially similar to the claim
against her in this federal action, thereby satisfying the threshold Colorado River
question. The state court claims against Wright are for undue influence and conversion
and are based in large part on her alleged relation to the unauthorized withdrawal of
money from the two trust accounts. The federal court claim against Wright is for
"Wrongful Removal of Assets" and undue influence and, like the state court claims, are
based on her alleged relation to the unauthorized withdrawal of money from the same
accounts. Therefore, the actions against Wright in state and federal court arise out of
the same alleged conduct and seek to vindicate the same rights.
17Montanore Minerals Corp. v. Bakie, 867 F.3d 1160, 1170 (9th Cir. 2017).
18R.R. St., 656 F.3d at 978-79 (internal footnotes omitted).
19Am. Int'l Underwriters (Philippines), Inc. v. Continental Ins. Co., 843 F.2d 1253, 1257
(9th Cir. 1988).
20Seneca Ins. Co., 862 F.3d at 842.
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The Sneads argue that the actions are not sufficiently similar because the state
court action was brought by the estate of John H. Snead, with Monique Snead bringing
the action only in her capacity as the representative of her father's estate. They argue
that the state court action "contains no claims from a party with standing to seek relief
related to the Trusts."21 The court is not persuaded that the differences in how the
Sneads decided to pursue their two complaints makes the claims against Wright
dissimilar for purposes of a Colorado River analysis. As noted by Wright in her reply
brief, a simple "head count" that "ignor[es] the substance of the claims brought and the
interests represented in the state court action" is not the appropriate process for
determining substantial similarity.22 Indeed, the determination of whether to stay federal
proceedings under Colorado River does not rest on some "mechanical checklist" but
rather is a pragmatic and flexible analysis.23
The pertinent parties in the state and federal cases are the same. Both actions
are spearheaded and directed by Monique Snead and John G. Snead in their various
capacities related to their father's estate and trusts. Both Monique Snead and John G.
Snead are represented by the same attorney and that attorney is litigating both the state
court case and the federal case. Both individuals have been involved in the state court
case.24
While the estate is the only plaintiff in the state case, the complaint and discovery
clearly show that the primary goal of that case is not simply to recover real and personal
property that allegedly belong to the estate but also to recover money that was
wrongfully taken from the Snead trusts. That is to say, it is clear that the state complaint
is raising claims on behalf of the Snead Irrevocable Trust and the John H. Snead
21Doc. 23 at p. 6.
22Doc. 26 at p. 2.
23Am. Int'l Underwriters, 843 F.2d at 1257.
24Doc. 26-2; 16-12;
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Revocable Trust.25 Moreover, as pointed out by Wright, the value in the state case rests
primarily on the allegations surrounding the two trusts—the value of the money alleged
to have been wrongfully taken out of the Snead Irrevocable Trust amounts to over
$500,000 with an additional amount of around $300,000 taken from the revocable trust
account, while the value of the property alleged to have been wrongfully diverted from
the estate prior to John H. Snead's death is around $200,000. The Sneads now argue
that they filed this federal case after realizing that the trusts lie outside of the estate, but
the court finds such an argument disingenuous, as the trust documents were in the
estate's possession at least at the time initial disclosures were exchanged and the trust
documents show that the trust assets were separate.26 The estate nonetheless pursued
the trust allegations in state court.
Monique Snead, as representative of the estate, has litigated the trust claims in
state court and in turn has protected the interests of herself and her brother as the two
beneficiaries of the trusts. The fact that Monique Snead did not pursue the state court
claim in her capacity as a beneficiary or include her brother in the suit in his capacity as
beneficiary and trustee is of no consequence here, as under Alaska law neither the
trustee nor the beneficiaries are necessary parties to an action involving a trust as long
as that trust's beneficiaries are being adequately represented.27
25The complaint alleges that Wright wrongfully withdrew or transferred funds "from
accounts belonging to Mr. Snead" (Doc. 16-2 at ¶ 8) and Monique Snead's answers to Wright's
interrogatories makes clear that her allegations involve the withdrawal of money from the John
H. Snead Revocable Trust (Doc. 16-3 at p.4). Monique Snead propounded discovery in the
state case that focused on gathering information about the withdrawals from both of the Snead
trust accounts (Doc. 26-4 at pp. 7-8; doc. 16-4).
26See doc. 26-3.
27In re Pac. Marine Ins. Co. v. Harvest States Coop., 877 P.2d 264, 269 (Alaska 1994).
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The inclusion of Merrill Lynch as a defendant in this federal action does not make
it dissimilar from the state action. Wright is seeking only a stay as to the federal claim
against her. Partial stays under the Colorado River doctrine are permissible.28
B. Colorado River Factors
Having determined that the state and federal claims against Wright are
substantially similar, the court turns to the specific factors that determine whether a stay
under Colorado River is appropriate. The first two factors—which court first assumed
jurisdiction over any property over which jurisdiction has been asserted and the
inconvenience of the federal forum—are not relevant to the analysis. There is no
property at stake and both state and federal courts are located in Anchorage, Alaska.
Therefore, these two factors can be disregarded in the court's balancing process.29
1. Avoiding piecemeal litigation
"Piecemeal litigation occurs when different tribunals consider the same issue,
thereby duplicating efforts and possibly reaching different results."30 However, "[a]
general preference for avoiding piecemeal litigation is insufficient to warrant abstention"
because "[a]ny case in which Colorado River is implicated will inevitably involve the
possibility of conflicting results, piecemeal litigation, and some duplication of judicial
efforts . . . ."31 There must be exceptional circumstances that make piecemeal litigation
"particularly problematic."32 Exceptional circumstances can include a clear federal
28See ScripsAmerica, Inc. v. Ironridge Global LLC, 56 F. Supp. 3d 1121, 1146-47 (C.D.
Cal. 2014) (explaining that district courts in the Ninth Circuit have found partial stays permissible
"where some, but not all, of a federal plaintiff's claims are pending in a parallel state action.").
29See Nakash, 882 F.2d at 1415 n.6 (noting that factors that are irrelevant to the
particular situation are disregarded).
30Am. Int'l Underwriters, 843 F.2d at 1258.
31Seneca Ins. Co., 862 F.3d at 842 (internal quotation marks omitted).
32Id. at 843.
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policy that the claims should be tried in state courts or some other "special or important
rationale" for staying the federal action.33
The fact that the claims against Wright proceeded to near completion in state
court suggests that duplicative litigation could be particularly problematic. The parties
already exchanged discovery and litigated the issue of whether the attorney-client
privilege between John H. Snead and his attorneys had been waived. Wright prevailed
on that motion. Monique Snead filed an offer of judgment and a notice of settlement.
The court entered an order enforcing the settlement. While the state court later allowed
the estate to file a late opposition to the motion to enforce the settlement and is now
considering the matter anew, relitigation of the same issue in federal court while the
state court case is considering whether the matter has in fact been settled appears to
present a unique problem of wasted judicial efforts. However, in the event this specific
circumstance is insufficient to meet the piecemeal litigation factor, the court finds that a
stay is nonetheless warranted because, as set forth below, the balance of the remaining
factors still weigh strongly in favor of a stay.
2. The Order in Which the Forums Obtained Jurisdiction
Another factor to consider is which of the forums first obtained jurisdiction. This
factor compares not just the filings dates of the two actions but also the relative
progress made in the two proceedings.34 The state court case was filed over a year and
a half before this federal action. Discovery and motion practice have already occurred
in the state case. As noted above, the case has proceeded to a dispute about whether
the parties in fact have an enforceable settlement agreement that would resolve the
matter. Given the substantial progress that has occurred in the state court litigation, the
33Id.
34Montanore, 867 F.3d at 1168.
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Sneads "should . . . be bound by its initial choice of the state forum."35 Therefore, this
factor weighs strongly in favor of a stay.
3. Source of Law
Which source of law governs the dispute is a more influential factor when there
are federal issues presented or when the state law is particularly complex or difficult
enough to render the state court better suited to apply the law.36 The issue of whether
Wright unduly influenced and took money from the Snead trust accounts will be
resolved under state law. There are no federal issues presented here that would weigh
in favor of denying a stay, but neither are there complex matters of law presented here
that weigh in favor of a stay. Therefore, the court finds that this factor is neutral to the
analysis.
4. Adequacy of the Forum to Protect the Rights of the Federal Litigants
"A district court may not stay or dismiss the federal proceeding if the state
proceeding cannot adequately protect the rights of the federal litigants."37 Here, the
Sneads do not contend that they are unable to allege any cause of action in the state
action, that the state court lacks jurisdiction to hear the claims asserted in this case, or
that the state court cannot grant the relief sought. However, this factor, like source of
law, "is more important when it weighs in favor of federal jurisdiction."38 That is, the fact
that state court will adequately protect the litigants' rights may weigh in favor of granting
a stay, but it is not a highly influential factor in the overall balancing process.
35Am. Int'l Underwriters, 843 F.2d at 1259.
36See, e.g, Nakash, 882 F.2d at 1416; Davis v. Koz, No. 2:18-cv-06597, 2018 WL
6444896, at *3 (C.D. Cal. Dec. 04, 2018).
37R&R St., 656 F.3d at 981.
38Travelers Indem. Co. v. Madonna, 914 F.2d 1364, 1370 (9th Cir. 1990) (internal
quotation marks omitted).
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5. Avoiding Forum Shopping
The forum shopping factor considers "whether either party improperly . . .
pursued suit in a new forum after facing setbacks in the original proceeding."39 Monique
Snead filed suit in state court in September of 2017. The parties conducted discovery
and a dispute arose about whether the attorney-client privilege should apply to
communications between John H. Snead and his attorneys. The court ruled in favor of
Wright on that matter, and the Sneads subsequently decided to settle with Wright. In
September, Monique Snead filed a notice of settlement and represented to the court
that they had a settlement agreement and were finalizing paperwork. Counsel for
Monique Snead drafted the paperwork and sent it to Wright's counsel. The Sneads
then changed their minds about the settlement, and in March 2019 informed Wright that
they wanted to proceed with the lawsuit. Within a month the Sneads had filed a
complaint in federal court. As noted above, while the federal complaint adds Merrill
Lynch as a defendant, it raises the same allegations against Wright with the same
goal—to recover money they believe she wrongfully took from the trusts. Based on the
sequence of events, the court concludes that the Sneads were seeking to avoid the
state court proceedings and potential enforcement of the settlement when they filed in
federal court. This factor weighs strongly in favor of a stay.
6. Resolution in State Court
This final factor is part and parcel of the threshold question of similarity. The
court must look at whether the state and federal claims are similar enough that the state
court can fully resolve the issues between the parties.40 Given that the claim against
Wright in federal court is essentially the same as the claims against her in state court,
as more particularly explained above, the court has confidence that the state litigation
can end the dispute between the Sneads and Wright. Indeed, if the state court finds
39Seneca Ins. Co., 862 F.3d at 846.
40Montanore, 867 F.3d at 1170.
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that the parties had an agreement to settle and enforces that agreement, the Sneads'
litigation with Wright ends. If the court does not enforce the settlement agreement, the
parties can continue to litigate the matter to a resolution in state court. Indeed, as noted
above, the state court has been presiding over the matter for almost two years and has
made far more progress towards resolution than this court.
C. Balancing the Colorado River Factors
Taking the relevant factors into consideration, five of the six favor a stay. The
order in which the forums obtained jurisdiction, the desire to avoid forum shopping, and
the ability of the state court to resolve the issues between the Sneads and Wright all
weigh strongly enough in favor of a stay to tip the balance away from the exercise of
federal jurisdiction. Whether the state court can protect the rights of the federal litigants
also weighs in favor of a stay, but to a lesser extent. Furthermore, the desire to avoid
piecemeal litigation should also weigh in favor of a stay here, although the court
concludes that the other factors can justify a stay on their own. The last relevant
factor—which law provides the rule of decision—is a neutral factor here, as it clearly
does not tip the scale back towards the exercise of federal jurisdiction.
V. CONCLUSION
Based on the preceding discussion, Defendant's motion to stay at docket 15 is
GRANTED. The parties are directed to inform the court when a resolution or final
judgment is reached in the state court proceedings.
DATED this 28th day of July 2019.
/s/ JOHN W. SEDWICK
SENIOR JUDGE, UNITED STATES DISTRICT COURT
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