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Life-Link Int'l, Inc. v. Lalla - 902 F.2d 1493 (10th Cir. 1990)

Rule:

The circumstances permitting the dismissal of a federal suit due to the presence of a concurrent state proceeding for reasons of wise judicial administration are considerably more limited than the circumstances appropriate for abstention. The court must ascertain whether there exist "exceptional" circumstances, the "clearest of justifications" to justify the surrender of jurisdiction, with the balance heavily weighted in favor of the exercise of jurisdiction. Several factors guide the court's analysis: (a) which court first assumed jurisdiction over any property; (b) the inconvenience of the federal forum; (c) the desirability of avoiding piecemeal litigation; and (d) the order in which concurrent jurisdiction was obtained. The court must also consider the adequacy of the state court proceedings to protect the parties' rights, whether issues of federal law are presented, and whether the attempt to invoke federal jurisdiction was done in bad faith.

Facts:

Ozie Lalla commenced a state court action against Life-Link International, Inc. for collection of a debt. Life-Link International, Inc. counterclaimed for trademark infringement under 15 U.S.C.S. § 1114; false designation of origin under 15 U.S.C.S. § 1125(a); common law unfair competition, trademark infringement, and injury to business reputation; deceptive trade practices under Colo. Rev. Stat. § 6-1-105; and breach of contract. Life-Link International, Inc. then brought an action in federal district court against Ozie Lalla and Nena Lalla asserting the same claims raised in the state court counterclaims. The state court stayed its proceedings. The district court granted Lalla’s motion for summary judgment, dismissing Life-Link International, Inc.’s claims on the ground that the latter waived its right to invoke the jurisdiction of the federal court by asserting counterclaims in the state court action.

Issue:

Did the district court err in its decision to dismiss Life-Link International, Inc.’s claims on the ground that it waived its right to invoke the jurisdiction of the federal court by asserting counterclaims in the state court action?

Answer:

Yes.

Conclusion:

The United States Court of Appeals reversed the summary judgment dismissing Life-Link International, Inc.’s action against the Lallas. The circumstances permitting the dismissal of a federal suit due to the presence of a concurrent state proceeding for reasons of wise judicial administration are considerably more limited than the circumstances appropriate for abstention. The Court held that the district court had an obligation to retain jurisdiction absent "exceptional circumstances" and that only the "clearest of justifications," none of them presented in this case, would warrant dismissal. 

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