BELL v. AMERICAN INTERNATIONAL INDUSTRIES INC.

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

LLOYD BELL, individually and )

as Executor of the Estate of )

Betty Whitley Bell, Deceased, )

)

Plaintiff, )

)

v. ) 1:17CV111

)

AMERICAN INTERNATIONAL )

INDUSTRIES, et al., )

)

Defendants/Third-Party )

Plaintiff, )

)

v. )

)

NESLEMUR COMPANY, f/k/a )

THE NESTLE-NEMUR COMPANY, )

)

Third-Party Defendant. )

MEMORANDUM OPINION AND ORDER

OSTEEN, JR., District Judge

Presently before the court is Third-Party Defendant

Neslemur Company’s (“Defendant” or “Neslemur”) Motion to Dismiss

for Insufficient Service of Process and Lack of Personal

Jurisdiction, Motion to Strike Third-Party Complaint, and Motion

to Dismiss, Abstain or Stay in Favor of Prior Pending

Litigation. (Doc. 97.) Neslemur filed a brief in support of its

Motion, (Doc. 98); Third-Party Plaintiff American International

Industries, Inc. (“Plaintiff” or “AII”) filed a response in

opposition, (Doc. 103); and Neslemur filed a reply, (Doc. 106).

Also pending is AII’s Motion for Leave to File a Sur-Reply

in Opposition to Neslemur’s Motion to Dismiss, (Doc. 125). This

Motion will be denied. Consideration of the proposed sur-reply,

(Doc. 125-1), is unnecessary for ensuring fairness, as the

court’s analysis, absent the sur-reply, renders its arguments

moot.

For the reasons stated herein, this court will deny

Defendant’s Motion.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Factual Background

Hairdresser Betty Whitley Bell (“Mrs. Bell”) allegedly used

Clubman talcum powder for over thirty years, beginning in the

1970s and continuing through 2009. (Amended Complaint (“Bell Am.

Compl.”) (Doc. 44) ¶ 9(a).) Mrs. Bell used the talcum powder as

a student, ((Doc. 104-2 at 9)1, and during her employment at hair

salons, (id. at 11, 13), including her own home hair salon, (id.

at 14-15). All of Mrs. Bell’s usage of Clubman powder took place

in North Carolina. (Doc. 104-4.) Mrs. Bell was eventually

diagnosed with mesothelioma. (Doc. 104-3 at 3.) Original

Plaintiff Lloyd Bell (“Mr. Bell”) brought a claim against AII,

1 All citations in this Memorandum Opinion and Order to

documents filed with the court refer to the page numbers located

at the bottom right-hand corner of the documents as they appear

on CM/ECF.

(Bell Compl. (Doc. 1)), which purchased the Clubman brand from

Neslemur on August 13, 1987, (Def./Third-Party Pl.’s Compl.

(“Third-Party Compl.”) (Doc. 86) at ¶ 10).

When AII purchased the Clubman brand from Neslemur, the

Asset Purchase Agreement, (Purchase Agreement (Doc. 86-1)),

explicitly provided that Neslemur would indemnify AII for “any

of Neslemur’s pre-existing liabilities.” (Third-Party Pl.’s Mem.

of Law in Opp’n. to Def.’s Mot. to Dismiss and Mot. to Strike

(“Third-Party Pl.’s Br.”) (Doc. 103) at 5.) Specifically, the

Purchase Agreement states:

[T]he Seller . . . also agrees to indemnify and hold the

Purchaser harmless against any and all claims, liabilities

or obligations which may arise out of or result from the

use of any products or goods sold by the Seller before the

Closing, and against all actions, suits, proceedings,

judgments, costs and expenses connected with any of the

foregoing; provided, however, that the Purchaser shall

timely notify the Seller . . . of any such claim and shall

permit the Seller . . . at [its] election, to negotiate and

settle such claim, and shall provide such records and

witnesses as may be necessary to litigate such claim.

(Purchase Agreement (Doc. 86-1) at 23) AII alleges that “a

significant portion of [Mr. Bell]’s allegations in the

underlying action relate to a product that was made and/or sold

by Neslemur.” (Third-Party Pl.’s Br. (Doc. 103) at 5.)

B. Procedural Background

Mr. Bell filed his complaint against AII on February 8,

2017, for claims related to its manufacture and distribution of

Clubman talcum powder, seeking damages. (Bell Compl. (Doc. 1).)

He filed an amended complaint on October 23, 2017. (Bell Am.

Compl. (Doc. 44).) Approximately two years later, on September

11, 2019, AII moved for leave to file a third-party complaint

against Neslemur, (Doc. 81), which was granted, (Doc. 85). In

this complaint, AII sought “a judgment indemnifying AII for any

settlement or compromise . . . and for any judgment or award

rendered against AII in [the suit with Mr. Bell],” as well as “a

judicial declaration that AII is . . . entitled to indemnity[.]”

(Third-Party Compl. (Doc. 86) at 12.) Defendant Neslemur is an

inactive Delaware company with no headquarters or offices in

North Carolina. (Third-Party Def.’s Mem. of Law in Supp. of Mot.

to Dismiss, Strike, Abstain, or Stay (“Third-Party Def.’s Br.”)

(Doc. 98 at 11.) Defendant moved to dismiss or strike the third-

party complaint on December 12, 2019. (Doc. 97.) At the time

briefs were filed regarding this Motion, the deadline for

discovery had just been extended to February 29, 2020. (Doc. 95

at 2.) After this Motion was filed, the court further extended

the date for general fact discovery to March 31, 2020. (Doc. 109

at 2.)

Meanwhile, earlier in 2019, AII had already filed a

complaint against Neslemur in the Court of Chancery of Delaware.

American International Industries v. Neslemur Co., Case No.

2019-0036 (Del. Ch. filed 2019) (“Delaware Action”). (See Doc.

99-1.) That ongoing case mirrors this one, as AII seeks a

declaratory judgment regarding its indemnification rights under

the Asset Purchase Agreement with Neslemur.

II. ANALYSIS

A. Personal Jurisdiction

On a personal jurisdiction challenge, a plaintiff bears the

burden of proving jurisdiction by a preponderance of the

evidence. Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs.,

Inc., 334 F.3d 390, 396 (4th Cir. 2003). But “[o]nce a defendant

presents evidence indicating that the requisite minimum contacts

do not exist, the plaintiff must come forward with affidavits or

other evidence in support of its position.” Pathfinder Software,

LLC v. Core Cashless, LLC, 127 F. Supp. 3d 531, 538 (M.D.N.C.

2015) (quoting Vision Motor Cars, Inc. v. Valor Motor Co., 981

F. Supp. 2d 464, 468 (M.D.N.C. 2013)). When the court does not

hold an evidentiary hearing, the court “must construe all

relevant pleading allegations in the light most favorable to the

plaintiff, assume credibility, and draw the most favorable

inferences for the existence of jurisdiction.” New Wellington

Fin. Corp. v. Flagship Resort Dev. Corp., 416 F.3d 290, 294 (4th

Cir. 2005) (internal quotation marks omitted) (quoting Combs v.

Bakker, 886 F.2d 673, 676 (4th Cir. 1989).

To determine whether personal jurisdiction is proper, the

court engages in a two-part inquiry: first, North Carolina's

long-arm statute must provide a statutory basis for the

assertion of personal jurisdiction, and second, the exercise of

personal jurisdiction must comply with due process. Christian

Sci. Bd. of Dirs. of the First Church of Christ, Scientist v.

Nolan, 259 F.3d 209, 215 (4th Cir. 2001); Vogel v. Wolters

Kluwer Health, Inc., 630 F. Supp. 2d 585, 594–95 (M.D.N.C.

2008).

1. North Carolina’s Long-Arm Statute

North Carolina’s long arm statute, N.C. Gen. Stat.

§ 1-75.4(1)d, is construed “to extend jurisdiction over

nonresident defendants to the full extent permitted by the Due

Process Clause.” Christian Sci. Bd. of Dirs., 259 F.3d at 215

(citing Century Data Sys., Inc. v. McDonald, 109 N.C. App. 425,

427, 428 S.E.2d 190, 191 (1993)). Thus, this court’s sole

inquiry is whether personal jurisdiction is proper under the Due

Process Clause.

2. Due Process and Personal Jurisdiction

Due process allows a court to exercise general or specific

jurisdiction over a defendant. General jurisdiction exists over

a corporate defendant “in the corporation’s state of

incorporation or principal place of business.” Pub. Impact, LLC

v. Bos. Consulting Grp., Inc., 117 F. Supp. 3d 732, 738

(M.D.N.C. 2015) (citing Daimler AG v. Bauman, 571 U.S. 746, 761

n.19 (2015)); see also Helicopteros Nacionales de Colombia, S.A.

v. Hall, 466 U.S. 408, 414 n.9 (1984) (“When a State exercises

personal jurisdiction over a defendant in a suit not arising out

of or related to the defendant’s contacts with the forum, the

State has been said to be exercising ‘general jurisdiction’ over

the defendant.”). General jurisdiction requires a defendant’s

“affiliations with the State [to be] so ‘continuous and

systematic’ as to render [it] essentially at home in the forum

State.” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564

U.S. 915, 919 (2011) (citing Int'l Shoe Co. v. Washington, 326

U.S. 310, 317 (1945)). Here, general jurisdiction over Defendant

is inappropriate. Delaware was Neslemur’s state of

incorporation, (Doc. 99-15 at 2), and it does not appear to be

disputed that Neslemur has no offices or headquarters in North

Carolina. (Third-Party Compl. (Doc. 86) ¶ 3; see also (“Third-

Party Def.’s Br.”) (Doc. 98) at 11.)

Specific jurisdiction, on the other hand, exists when the

forum state exercises personal jurisdiction over the defendant

“in a suit arising out of or related to the defendant’s contacts

with the forum[.]” Helicopteros, 466 U.S. at 414 n.8. “[T]here

must be an ‘affiliation between the forum and the underlying

controversy, principally, [an] activity or an occurrence that

takes place in the forum State.’” Bristol-Myers Squibb Co. v.

Super. Ct. of Cal., 582 U.S. ____, ____, 137 S. Ct. 1773, 1780

(2017) (quoting Goodyear, 564 U.S. at 919). Moreover, if the

underlying claim does not arise out of the defendant’s contacts

with the forum state, “specific jurisdiction is lacking

regardless of the extent of a defendant’s unconnected activities

in the State.” Id. at 1781 (citing Goodyear, 564 U.S. at 931

n.6).

To exercise specific jurisdiction over a defendant, due

process requires that the court examine “(1) the extent to which

the defendant purposefully availed itself of the privilege of

conducting activities in the State; (2) whether the

plaintiff[’s] claims arise out of those activities directed at

the State; and (3) whether the exercise of personal jurisdiction

would be constitutionally reasonable.” UMG Recordings, Inc. v.

Kurbanov, 963 F.3d 344, 351 (4th Cir. 2020), petition for cert.

docketed, (U.S. Oct. 16, 2020) (No. 20-503) (quoting Consulting

Eng'rs Corp. v. Geometric Ltd., 561 F.3d 273, 278 (4th Cir.

2009)). This court will analyze these requirements in order,

determining whether this court may exercise specific

jurisdiction over Defendant.

a. Purposeful Availment

In order to establish specific jurisdiction, a plaintiff

must first illustrate that a corporate defendant purposefully

availed itself of the state of North Carolina. The relevant

indemnification contract, while executed in New York, (Purchase

Agreement (Doc. 86-1) at 8), under New York law, (id. at 13),

specifically indemnified Plaintiff for Defendant’s product sales

prior to the agreement. (Third-Party Def.’s Br. (Doc. 98 at 6.)

Defendant “sold, shipped, manufactured or distributed” Clubman

talcum powder in the state of North Carolina “for at least

seventeen years.” (Bell Am. Compl. (Doc. 44) ¶¶ 2, 9, 11-14.)

Defendant’s sales of Clubman powder to Mrs. Bell occurred in

North Carolina, as did Ms. Bell’s allegedly resulting illness.

(Id. ¶¶ 9, 11.) At this stage, these facts have not been

challenged. Therefore, this court finds, for purposes of this

Motion only, that Defendant Neslemur did business in North

Carolina by selling Clubman products for at least seventeen

years.

In § 8.1(b) of the Asset Purchase Agreement, Defendant

knowingly agreed to indemnify AII for any defective products

sold “by the Seller before the Closing.” (Purchase Agreement

(Doc. 86-1) at 23.) The agreement specifically indemnifies AII

“against any and all claims, liabilities or obligations” arising

from previously sold Neslemur products. (Id.) It goes on to also

cover “all actions, suits, proceedings, judgments, costs and

expenses connected with any of the [claims, liabilities or

obligations.]” (Id.) Under New York law, an agreement to

indemnify against liabilities is construed more broadly than an

agreement to indemnify merely against losses: a right to

indemnification against liabilities “arises when judgment is

entered,” rather than after the indemnified party has satisfied

any potential award. Madeira v. Affordable Hous. Found., Inc.,

323 F. App'x 89, 91 (2d Cir. 2009). Although this broad language

does not give Neslemur an explicit duty to defend AII, see Colon

v. Metro-N. Commuter R.R. Co., No. 3:13-CV-00325 (JAM), 2018 WL

2316729, at *3 (D. Conn. May 22, 2018), aff'd sub nom. Metro-N.

Commuter R.R. Co. v. United Illuminating Co., 777 F. App'x 544

(2d Cir. 2019), Neslemur also expressly reserved the right to

“negotiate and settle . . . claim[s]” where it might be subject

to indemnity, (Purchase Agreement (Doc. 86-1) at 23).

Taken together, the language in the Asset Purchase

Agreement makes clear that Neslemur agreed to those provisions

with full awareness of its potential liability and its possible

involvement in cases such as this one. The agreement’s breadth -

Defendant agreed to cover any claims, costs, or liabilities

without geographic limitation - shows an intent to hold

Plaintiff harmless in any state in which Defendant sold goods.

This is similar to an insurance company contracting to provide

coverage for a company that might do business in North Carolina.

See, e.g., Danaher Corp. v. Travelers Indem. Co., No. 10-CV-121

(JPO), 2014 WL 7008938, at *6 (S.D.N.Y. Dec. 12, 2014)

(“Industria contracted to provide insurance coverage to

companies authorized to do business in New York. This is

sufficient to show that it purposefully availed itself of [New

York].”). Here, Neslemur did business and sold its product in

North Carolina, and subsequently contracted with AII to hold AII

“harmless against any and all claims . . . which may arise out

of . . . the use of any products or goods sold by [Neslemur]

before the Closing[.]” (Purchase Agreement (Doc. 86-1) at 23.)

Neslemur has thereby purposefully availed itself of the state.

b. “Aris[ing] out of”

For specific jurisdiction to apply, there must be “an

affiliation between the forum and the underlying controversy,

principally, [an] activity or an occurrence that takes place in

the forum State and is therefore subject to the State's

regulation.” Goodyear, 564 U.S. at 919 (internal quotation marks

and brackets omitted). However, when the claim does not arise

out of the defendant’s connections to the state, specific

jurisdiction will not arise. Bristol-Myers Squibb, 137 S. Ct. at

1781 (“[E]ven regularly occurring sales of a product in a State

do not justify the exercise of jurisdiction over a claim

unrelated to those sales.”). Defendant argues that the claim at

issue here arises out of the Asset Purchase Agreement, not the

underlying purchase of Clubman powder. (Third-Party Def.’s Br.

(Doc. 98) at 11.) However, this claim does in fact arise out of

conduct in North Carolina: the conduct Defendant assumed

liability for, via the Asset Purchase Agreement, included

extensive sales of Clubman in North Carolina. Thus, there is

sufficient evidence that this indemnification claim arises out

of Defendant’s conduct in North Carolina.

c. Reasonableness

The final requirement of personal jurisdiction under due

process is reasonableness. Here, the court must consider if the

litigation is “‘so gravely difficult and inconvenient’ that [the

defendant] is at a ‘severe disadvantage’ in comparison to its

opponent.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478

(1985) (quoting M/S Bremen v. Zapata Off–Shore Co., 407 U.S. 1,

18 (1972); McGee v. Int’l Life Ins. Co., 355 U.S. 220, 223

(1957)). While Neslemur expresses concern about the timing of

the case and its potential judicial inefficiency, (Third-Party

Def.’s Br. (Doc. 98) at 5), Defendant does not identify any

particular burdens imposed by litigating in a North Carolina

federal court rather than a Delaware state court. This court

will therefore find that Defendant is subject to specific

personal jurisdiction in North Carolina.

B. Service of Process

Proper service of process must adhere to state law for

serving a summons in “the state where the district court is

located or where service is made.” Fed. R. Civ. P. 4(e)(1)

(emphasis added). Service was made in Delaware in this case.

(Third-Party Pl.’s Br. (Doc. 103) at 9.) This court will address

service under the law of Delaware, as it is dispositive.2

Under Delaware law, if a plaintiff “cannot by due diligence

serve the process in any manner provided for by subsection (a)

of this section, [which provides for service upon a

corporation’s registered agent], it shall be lawful to serve the

process against the corporation upon the Secretary of State

2 North Carolina law allows for a defendant corporation to

be served, among other ways, by “delivering a copy of the

summons and of the complaint to an agent authorized by

appointment or by law to be served or to accept service of

process.” N.C. Gen. Stat. § 1A-1, Rule 4(j)(6)(b) (emphasis

added). Both Plaintiff (Third-Party Pl.’s Br. (Doc. 103) at 10)

and Defendant (Third-Party Def.’s Br. (Doc. 98) at 10)

acknowledge that North Carolina law defers to “Delaware

substantive law to decide whether the party is properly

qualified as an ‘agent’ to receive service of process.” Deutsche

Bank Tr. Co. Americas v. Tradewinds Airlines, Inc., No. 03 CVS

12215, 2009 WL 1154861, at *6 (N.C. Super. Apr. 29, 2009). Thus,

Delaware law is ultimately dispositive, even if this court’s

analysis begins with North Carolina law.

. . . .” Del. Code Ann. tit. 8, § 321(b); see also Ross v.

Venezuelan-Am. Indep. Oil Producers Ass'n, 230 F. Supp. 701, 702

(D. Del. 1964) (finding service to the Secretary of State was

valid with regard to a dissolved corporation). Defendant alleges

that Plaintiff failed to use “due diligence” to attempt to serve

Defendant’s registered agents before resorting to service via

the Secretary of State. (Third-Party Def.’s Br. (Doc. 98) at

10.) However, at no point does Defendant dispute the allegation

that it no longer possesses valid registered agents. Neslemur is

a dissolved corporation, and its former registered agents no

longer have a valid agency relationship with the corporation –

searching for these agents to accept service would clearly have

been a futile exercise. See Int'l Pulp Equip. Co. v. St. Regis

Kraft Co., 54 F. Supp. 745, 748 (D. Del. 1944) (“[A]fter a

corporate dissolution . . . the agency relationship between the

corporation, as principal, and its local resident agent, as

agent, ceases; and the latter is no longer possessed of powers

to act for its principal.”); United States ex rel. Landis v.

Tailwind Sports Corp., 51 F. Supp. 3d 9, 31 (D.D.C. 2014)

(applying principles from Int’l Pulp to modern Delaware service

law). The court in Int’l Pulp addressed this issue directly by

stating that “[t]he Secretary of State's capacity to accept

service on behalf of a dissolved corporation is one of the

conditions upon which a Delaware corporation pursues its right

to do business under a Delaware charter.” 54 F. Supp. at 749.

Service in this instance was proper under Delaware law.

C. Late Impleader of Neslemur

Defendant next urges this court to strike this third-party

claim under the authority provided by Fed. R. Civ. P. 14(a)(4).

Courts consider a variety of factors when considering whether to

accept a defendant’s impleader of a third party. These same

factors require consideration when the court is urged to strike

an existing third-party claim. Factors for the court’s analysis

include:

[D]elay in presenting the third-party complaint to the

court, the prejudice to the non-moving party resulting

from the delay, the introduction of unrelated issues,

whether the new claims would unduly complicate the

original suit, the similarity between the issues and

evidence in the original suit and the third-party

complaint, and whether the claim is obviously

unmeritorious.

United States v. Savoy Senior Hous. Corp., Civil Action No.

6:06CV031, 2008 WL 631161, at *2 (W.D. Va. Mar. 6, 2008).

Notably, “no single factor is dispositive” in this inquiry. Id.

Defendant does not allege that this third-party claim

introduces unrelated issues, unduly complicates the original

case, or is obviously unmeritorious. Instead, Defendant focuses

on an alleged delay in Plaintiff’s presentation of the third-

party complaint. (Third-Party Def.’s Br. (Doc. 98) at 16.) As

Plaintiff states, it joined Defendant at a time “in conformity

with the scheduling order in this case.” (Third-Party Pl.’s Br.

(Doc. 103) at 25.) The court set a deadline to request leave for

joinder of parties by September 12, 2019. (Id. at 24.) Plaintiff

adhered to this scheduling deadline and filed its Motion for

Leave to File a Third-Party Complaint on September 11, 2019.

(Doc. 81.)

Defendant argues that this timeline created substantial

prejudice, since discovery had already begun when the third-

party complaint was filed. (Third-Party Def.’s Br. (Doc. 98) at

15.) Defendant alleges that Plaintiff stalled in filing its

third-party complaint, (id. at 5), yet fails to allege any

actual harm: Defendant has been involved in the case for ample

time to participate in discovery and prepare for trial.

Defendant analogizes, (id. at 14, 15), to Murphy v. Keller

Industries, Inc., 201 F.R.D. 317 (S.D.N.Y. 2001). However, in

Murphy, the court struck a third-party complaint because the

third-party plaintiff had already taken multiple depositions

without even informing the third-party defendant. Id. at 321.

Defendant also cites Zero Tolerance Entertainment, Inc. v.

Ferguson, 254 F.R.D. 123 (C.D. Cal. 2008), in which discovery

had already concluded by the time the third-party claim was

brought. (Third-Party Def.’s Br. (Doc. 98) at 15.) Here,

discovery had barely begun when Defendant was joined. Defendant

was joined and informed (though only two weeks in advance) prior

to the first deposition that took place. (Doc. 106 at 9.)

Defendant’s counsel even “attended the Bell deposition,” though

defense counsel did not participate. (Id. n.2.)3 Even if

Defendant argues that it chose not to participate in discovery

because its Motion to Dismiss and jurisdiction challenges

remained pending, Defendant fails to point to specific,

otherwise avoidable prejudice caused by the timing of its

joinder.

Given trial is currently set for July 2021, (Doc. 213), six

months later than anticipated at the time this Motion was filed,

(Third-Party Pl.’s Br. (Doc. 103) at 24), it does not appear

that any minimal delay by Plaintiff has prejudiced Defendant in

terms of preparing for trial. At the time of this Motion’s

filing, expert discovery was not set to begin for several

months. Id. Moreover, after this Motion was filed, the court

3 Notably, the sole deposition that took place prior to the

filing of this Motion was the deposition of Mr. Bell. Defendant

vehemently alleges that Plaintiff’s legal claim against it under

the Asset Purchase Agreement is entirely unrelated to Mr. Bell.

(Third-Party Def.’s Br. (Doc. 98) at 11-13.) By that logic,

Defendant would not have been prejudiced at all by late notice

regarding the deposition of Mr. Bell. This court, however,

considers the underlying claim relevant to this impleader, and

therefore considers the deposition of Mr. Bell in its analysis

of undue prejudice.

further extended the period for fact discovery through March 31,

2020. (Doc. 109 at 2.) This court has previously found that

where discovery has not yet begun, delay is “not . . .

prejudicial” even if purposeful. Feit Elec. Co., Inc. v. Cree,

Inc., No. 1:15CV535, 2016 WL 10587196, at *1 (M.D.N.C. June 20,

2016). While fact discovery had technically begun in this

instance, Defendant was joined before the first deposition even

occurred. (Third-Party Pl.’s Br. (Doc. 103) at 25.) Moreover,

nothing forecloses this court from further expanding the

discovery period if Defendant demonstrates true necessity going

forward. Defendant has not sufficiently demonstrated that it has

been unduly prejudiced by the timeframe presented. Moreover,

while Plaintiff was not particularly speedy in joining

Defendant, Plaintiff was able to abide by the court’s scheduling

order without issue. This court therefore will not strike the

motion due to any alleged delay by Plaintiff.

D. Abstention Doctrine

Defendant also contends that this court should abstain from

exercising jurisdiction over this case due to the pending state

case in Delaware. (Third-Party Def.’s Br. (Doc. 98) at 17.)

Abstention, however, “is the exception, not the rule.” Colo.

River Water Conservation Dist. v. United States, 424 U.S. 800,

813 (1976); see also id. at 817 (noting the “virtually

unflagging obligation of the federal courts to exercise the

jurisdiction given them”). Thus, this court’s task “is not to

find some substantial reason for the exercise of federal

jurisdiction,” but rather “to ascertain whether there exist

‘exceptional’ circumstances, the ‘clearest of justifications,’

. . . to justify the surrender of that jurisdiction.” Moses H.

Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25-26

(1983).4

First, the court must determine whether the concurrent

state and federal proceedings are parallel. Al-Abood ex rel.

Al-Abood v. El-Shamari, 217 F.3d 225, 232 (4th Cir. 2000) (“The

threshold question in deciding whether Colorado River abstention

is appropriate is whether there are parallel suits.”). The

Delaware action may be deemed parallel to this federal case only

if “substantially the same parties litigate substantially the

same issues in different forums.” New Beckley Mining Corp. v.

Int’l Union, United Mine Workers of Am., 946 F.2d 1072, 1073

4 Defendant relies upon the Supreme Court’s decision in

Brillhart, which sets the test for abstention in cases involving

only declaratory judgments. Brillhart v. Excess Ins. Co. of Am.,

316 U.S. 491, 495 (1942). However, the Fourth Circuit has

clarified that mixed actions involving both declaratory and non-

declaratory relief fall under the purview of the Colorado River

standard rather than the Brillhart standard. See VonRosenberg v.

Lawrence, 781 F.3d 731, 735 (4th Cir. 2015) (finding that

“[t]he Colorado River standard applies to all mixed claims,”

even those in which a non-declaratory claim is merely ancillary

to a request for declaratory relief).

(4th Cir. 1991). The issues before the court must be truly

identical: merely “some factual overlap does not dictate that

proceedings are parallel.” Id. at 1074. The Fourth Circuit also

considers “the remedies sought and the issues raised.” See Chase

Brexton Health Servs., Inc. v. Maryland, 411 F.3d 457, 465 (4th

Cir. 2005); New Beckley, 946 F.2d at 1074 (finding that denial

of abstention may be warranted where “[t]he parties in both

actions are virtually identical, but the issues raised and

remedies sought are not”); see also Gannett Co. v. Clark Constr.

Grp., Inc., 286 F.3d 737, 743 (4th Cir. 2002) (criticizing

abstention when the two actions at issue sought “different

remedies”). In the case at hand, Defendant alleges that the

issues before this court and before the Chancery Court in

Delaware are the same, claiming both suits seek “precisely the

same relief,” (Third-Party Def.’s Br. (Doc. 98) at 21).

Defendant alleges both actions seek a declaratory judgment

regarding Neslemur’s indemnification obligations to AII. (Id. at

21-22.) However, in this case, AII also seeks a judgment for any

money Neslemur may owe Mr. Bell due to its agreement with AII.

(Third-Party Compl. (Doc. 86) at 11-12.) This goes beyond

perfectly identical relief.

Moreover, the Fourth Circuit has “strictly construed the

requirement . . . that [for suits to be parallel] the parties

involved [must] be almost identical,” Great Am. Ins. Co. v.

Gross, 468 F.3d 199, 208 (4th Cir. 2006), and has cautioned

district courts to avoid making this determination at “too

general a level.” See Chase Brexton, 411 F.3d at 464. Original

Plaintiff Mr. Bell is not party to the Delaware action, even

though AII and Neslemur are the immediate Plaintiff and

Defendant in both actions. This renders the parties involved

less than identical as well.

Even if the court were to find that these two cases are

parallel under Colorado River, the court must also determine

whether “exceptional circumstances” warranting abstention exist

based on the following factors identified by the Fourth Circuit:

(1) whether the subject matter of the litigation

involves property where the first court may assume in

rem jurisdiction to the exclusion of others; (2)

whether the federal forum is an inconvenient one; (3)

the desirability of avoiding piecemeal litigation; (4)

the relevant order in which the courts obtained

jurisdiction and the progress achieved in each action;

(5) whether state law or federal law provides the rule

of decision on the merits; and (6) the adequacy of the

state proceeding to protect the parties’ rights.

Chase Brexton, 411 F.3d at 463-64. This determination “does not

rest on a mechanical checklist, but on a careful balancing of

the important factors as they apply in a given case, with the

balance heavily weighted in favor of the exercise of

jurisdiction.” Moses H. Cone, 460 U.S. at 16; see also Colorado

River, 424 U.S. at 818-19 (“[A] carefully considered judgment

taking into account both the obligation to exercise jurisdiction

and the combination of factors counseling against that exercise

is required. Only the clearest of justifications will warrant

dismissal.”). This court will consider these abstention factors

in order.

1. Jurisdiction Over Property

First, this claim does not involve any property, either in

Delaware or North Carolina. Since the Delaware court has no in

rem jurisdiction over any relevant property, this factor

counsels against abstention.

2. Inconvenience of Federal Forum

Second, the parties have not alleged any evidence

indicating that this federal forum will be inconvenient for any

reason other than duplicative litigation. Thus, this factor also

counsels against abstention.

3. Avoiding Piecemeal Litigation

The piecemeal litigation factor weighs in favor of

abstention. However, simply because a state claim is moving

forward at the same time as a federal claim does not mean the

court must abstain from proceeding with a case. Chase Brexton,

411 F.3d at 465 (“[T]he Supreme Court in Colorado River has

instructed federal courts that they are normally to accept

jurisdiction even in the face of concurrent state litigation.”).

Extraordinary circumstances are still required to warrant a stay

– here, though the state case began first, Defendant fails to

allege any exceptional inconveniences stemming from litigation

of this case in federal court. See KPS & Assocs., Inc. v.

Designs by FMC, Inc., 318 F.3d 1, 10-11 (1st Cir. 2003)

(“[C]oncerns about piecemeal litigation should focus on the

. . . practical effects of litigating suits . . . in two

separate fora, and weigh in favor of dismissal only if there is

some exceptional basis for dismissing one action in favor of the

other.”) (internal quotation marks omitted).

4. Order in which Jurisdiction was Obtained

The fourth factor, order in which jurisdiction was

obtained, counsels in favor of abstention: the state claim in

Delaware was filed before this federal action. (Third-Party

Def.’s Br. (Doc. 98) at 18.) Moreover, that case is scheduled

for trial in February of 2021, five months before this action is

scheduled to go to trial.5 Thus, the state case is farther along

in the proceedings than this federal action, which also weighs

in favor of abstention. Moses H. Cone, 460 U.S. at 3.

5 American International Industries v. The Neslemur Company

(Docket Report), No. 19C-04-258 (Del. Ch., retrieved Sept. 29,

2020.)

https://courtconnect.courts.delaware.gov/public/ck_public_qry_do

ct.cp_dktrpt_frames?backto=P&case_id=N19C-04-

258&begin_date=&end_date=

(“[P]riority should not be measured exclusively by which

complaint was filed first, but rather in terms of how much

progress has been made in the two actions.”).

5. Implication of Federal Law

No questions of federal law have been alleged. The merits

will therefore be decided based on state law, be it the law of

Delaware, North Carolina, or New York. This factor counsels in

favor of abstention as well.

6. Adequacy of State Court Proceedings

The final factor for the court’s consideration is whether

“state-court litigation will be an adequate vehicle for the

complete and prompt resolution of the issues between the

parties.” Id. at 28. For example, courts may consider whether

state court can provide proper remedies for the parties. See

McNeese v. Bd. of Educ. for Cmty. Unit Sch. Dist. 187, Cahokia,

Ill., 373 U.S. 668, 675 (1963). In this instance, a state court

could provide adequate remedies for all parties involved except

Original Plaintiff Mr. Bell. Mr. Bell is not included on the

original filing in Delaware, and therefore his interests will

not be weighed. Moreover, while AII can get an adequate

declaratory remedy in state court, it cannot obtain an immediate

indemnity judgment in the Delaware action for any money awarded

to Mr. Bell. Finally, while the state court remedy is adequate,

it is lesser than the options available to this federal court

because all parties are present in this case and a broader scope

of relief is requested. This factor thus counsels against

abstention.

7. Abstention Conclusion

While “a decision to abstain does not require the presence

of all of the factors,” Sto Corp. v. Lancaster Homes, Inc., 11

F. App’x 182, 187 (4th Cir. 2001), only three of the six factors

here favor abstention. Moreover, extraordinary circumstances are

necessary for the court to opt out of exercising jurisdiction.

Here, the cases are less than perfectly parallel, and the

federal case has the advantage of resolving all issues presented

between both cases. Given that “only the clearest of

justifications” warrants abstention, Moses H. Cone, 460 U.S. at

25-26, and this court’s exercise of jurisdiction is not unduly

inconvenient or unjust, Defendant’s motion to dismiss on these

grounds will be denied.

E. Staying Proceedings

Defendant also asks this court to stay the third-party

complaint due to the ongoing Delaware action. (Third-Party

Def.’s Br. (Doc. 98) at 17.) When considering whether to stay a

federal proceeding during the pendency of a similar state court

action, the Fourth Circuit has used both the Landis doctrine

(see Williford v. Armstrong World Indus., Inc., 715 F.2d 124,

127 (4th Cir. 1983)), and the Colorado River doctrine (see Cox

v. Planning Dist. I Cmty. Mental Health & Mental Retardation

Servs. Bd., 669 F.2d 940, 942–43 (4th Cir. 1982)). A stay is not

appropriate under either analysis.

This court has already determined that Defendant’s motion

cannot meet the high bar set by the Colorado River test, see

discussion infra pt. II.D. Turning to the Landis doctrine, the

Supreme Court has held that “the power to stay proceedings is

incidental to the power inherent in every court to control the

disposition of the causes on its docket with economy of time and

effort for itself, for counsel, and for litigants.” Landis v. N.

Am. Co., 299 U.S. 248, 254 (1936). As the Fourth Circuit has

explained:

[The power to grant a discretionary stay pending state

court proceedings under Landis] in the district courts

is well recognized. It is not, however, without

limitation. . . . [P]roper use of this authority calls

for the exercise of judgment which must weigh

competing interests and maintain an even balance. The

party seeking a stay must justify it by clear and

convincing circumstances outweighing potential harm to

the party against whom it is operative.

Williford, 715 F.2d at 127 (internal quotation marks omitted)

(quoting Landis, 299 U.S. at 254–55). When deciding whether to

stay proceedings under Landis, courts weigh the interests of

judicial economy, the potential prejudice to the non-moving

party in the event of a stay, and the hardship and inequity to

the moving party in the absence of a stay. See, e.g., White v.

Ally Fin., Inc., 969 F. Supp. 2d 451, 462 (S.D. W. Va. 2013);

Glenn v. Metech Recycling Inc., No. 1:19-cv-1066, 2020 WL

3577483, at *3 (M.D.N.C. July 1, 2020) (weighing these factors

in denying a stay).

The first factor, judicial economy, weighs in favor of a

stay. Two separate cases about nearly identical issues are

currently both set to go to trial in mid-2021. Trying the same

issue in both cases is an inefficient use of judicial resources.

See Blair v. Equifax Check Servs., Inc., 181 F.3d 832, 839 (7th

Cir. 1999) (“When overlapping suits are filed in separate

courts, stays . . . are the best means of coordination.”);

Mitchell v. Lonza Walkersville, Inc., Civil Action No. RDB-12-

3787, 2013 WL 3776951, at *2 (D. Md. July 17, 2013) (finding

courts must consider “the judicial resources that would be saved

by avoiding duplicative litigation if [a] case is . . .

stayed”).

The next factor for the court’s consideration is potential

prejudice to the non-moving party if a stay is granted. In the

event of a stay, Plaintiff AII would not be enormously

prejudiced – in fact, AII itself filed the Delaware action. As

currently scheduled, the Delaware action may be resolved prior

to this court’s trial date. However, the Delaware action does

leave out Mr. Bell, and as Plaintiff points out, “omits

significant issues related to Mrs. Bell’s purchase and use of a

product in North Carolina that was made or sold by Neslemur for

at least a decade.” (Third-Party Pl.’s Br. (Doc. 103) at 28.)

While Plaintiff would not be unduly damaged by a stay, Plaintiff

would at least endure the minimal hardship of having to seek

indemnity for Mr. Bell’s claims in a separate action from any

potential declaratory judgment. This would impose at least a

minimal hardship on Plaintiff.

The final factor is potential hardship to the moving party

if the stay is denied. Landis established that “the suppliant

for a stay must make out a clear case of hardship or inequity in

being required to go forward, if there is even a fair

possibility that the stay . . . will work damage to some one

else.” Landis, 299 U.S. at 255. Neslemur would not be prejudiced

by the absence of a stay. Neslemur would be required to

participate in this case in federal court regardless, given that

Plaintiff seeks an indemnity judgment not presently included in

the Delaware action. Moreover, Neslemur has not adequately

alleged any substantial hardship during discovery in this court,

despite its near-miss of the first deposition. Thus, Defendant

has failed to make the “clear case of hardship or inequity”

required by Landis and Williford. See White, 969 F. Supp. 2d at

463. Since Defendant fails to meet the requirements for a stay

under both Landis and Colorado River, the Defendant’s motion to

stay will be denied.

III. CONCLUSION

For the reasons set forth above, this court finds that

Third-Party Defendant Neslemur’s Motion to Dismiss for

Insufficient Service of Process and Lack of Personal

Jurisdiction, Motion to Strike Third-Party Complaint, and Motion

to Dismiss, Abstain or Stay in Favor of Prior Pending Litigation

will be denied with regards to all claims.

IT IS THEREFORE ORDERED that Third-Party Defendant’s

Motion, (Doc. 97), is DENIED. Defendant’s claims are DISMISSED

WITHOUT PREJUDICE.

IT IS FURTHER ORDERED that Third-Party Plaintiff American

International Industries, Inc.’s Motion for Leave to File a

Sur-Reply in Opposition to Neslemur’s Motion to Dismiss, (Doc.

125), is DENIED.

This the 6th day of November, 2020.

*

Ws Uirm L. Bhan, \.

United States District Jud

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