United States District Court, D. Hawaii
ORDER DENYING DEFENDANTS’ MOTIONS TO
Derrick K. Watson, United States District Judge.
real estate contract dispute, Defendant Julia and Dennis
Yates have moved pursuant to Federal Rule of Civil Procedure
12(b) to dismiss or stay the proceedings because of a
parallel proceeding in Nevada state court that they assert
warrants abstention under the Colorado River
doctrine. Dkt. No. 17. At the same time, Defendant CRC, Inc.
moves to dismiss this action for Plaintiffs’ failure to
engage in pre-suit mediation. Dkt. No. 15. Because this case
does not involve the “exceptional circumstances”
necessary for abstention under Colorado River, and
because nothing in the contract between CRC and Plaintiffs
requires a pre-suit mediation, both motions are DENIED.
& PROCEDURAL BACKGROUND
2005, Plaintiffs Hans and Louise Franke (collectively, the
“Frankes”) purchased a two-million-dollar home in
Hawaii (the “Property”). Dkt. No. 1, ¶ 11.
Beginning in 2011, the Frankes agreed to rent the property to
two Hawaii real estate agents, Defendants Julia and Dennis
Yates (collectively the “Yates”). Id. at
¶¶ 12– 13. The rental contract related to
this agreement was allegedly orchestrated by Defendant CRC
II, Inc. (“CRC”),  the Yates’ employer.
Id. at ¶¶ 13, 33. The Frankes maintain
that the Yates “did not pay a fair rental value for the
Property.” Id. at ¶ 13. The basis for
this claim is evidently that Mr. Franke was
“exceptionally vulnerable” because of his age and
medical condition, such that the Yates essentially took
advantage of him in negotiating the terms of the rental
agreement. See Id . at ¶¶ 14, 15.
around August 2013, the Yates proposed a new contractual
arrangement in which the Yates would: (1) purchase a ten
percent ownership interest in the Property; (2) reside at the
Property while paying only the “monthly property
costs”; (3) make upgrades to the Property; (4) pay
“cash sums” to the Frankes; and (5) eventually
sell the Property for a substantial profit. Id. at
¶¶ 16–18. The Yates, in turn, would receive a
payout from the sale. Id. at ¶ 19. The Frankes
do not allege that they accepted this proposed arrangement.
But in any event, the Yates allegedly resided on the Property
for nearly three years, performed “unnecessary”
upgrades, and made cash “investments” in the
Property which the Yates then sought to recoup from the
Frankes. Id. at ¶¶ 22, 23. For at least
part of this time, the Frankes were not present in Hawaii.
See Id . at ¶¶ 23, 32.
2016, the amount the Frankes were receiving from the Yates
was insufficient to cover the mortgage on the Property, and
the Yates agreed to sell the Property on behalf of the
Frankes. Id. at ¶¶ 24–25. The
Property sold in 2016 to a buyer that was a friend of the
Yates. In the process of selling the Property, the Yates
acted as the agents for both the Frankes and the buyer.
Id. at ¶¶ 25–28. The Frankes aver
that the Yates: (a) “did not make diligent efforts to
maximize the sale price”; (b) “breached their
fiduciary duty”; (c) “did not move reasonably
quickly to sell the Property”; and (d) “sought
the return of the funds that they had delivered” to the
Frankes while residing at the Property. Id. at
¶¶ 27, 29–31.
September 5, 2018, the Yates filed an action in Nevada state
court against the Frankes, alleging that the Frankes
“caused the escrow company to not pay” the Yates
their agreed-upon amount at the closing of the sale of the
Property. Dkt. No. 17-2, ¶¶
12–13. The Yates’ Nevada complaint asserts
claims for breach of contract and unjust enrichment and seeks
damages in excess of $139, 951. Id. at 3–4.
The Frankes filed their answer, alleging (16) affirmative
defenses including, inter alia, mitigation of
damages; intervening fault; unclean hands; offset; equitable
estoppel; fraud; unjust enrichment; and performance excused.
Dkt. No. 17-3 at 6–7. The Frankes did not file any
January 8, 2019, the Frankes filed this lawsuit against the
Yates and CRC, asserting claims for fraud; breach of
fiduciary duty; elder abuse; breach of contract; unjust
enrichment; and negligent hiring and supervision of
employees. Dkt. No. 1. Less than a month later (and five
months after the Yates originally filed suit), the Frankes
removed the state court action to Nevada federal
court. That court remanded the case back to
Nevada state court on August 26, 2019. In the interim,
however, Defendants filed the instant set of motions to stay
or dismiss this action. Dkt. Nos. 15, 17.
Yates’ Motion to Stay or Dismiss Under Colorado
Yates urge the Court to dismiss or stay this case under the
abstention principles established in Colorado River Water
Conservation District v. United States, 424 U.S. 800
(1976). Dkt. No. 17 at 8. But a stay or dismissal under
Colorado River is unwarranted, and therefore this
Court declines to abdicate its duty to exercise jurisdiction.
abstention under Colorado River “rest[s] on
considerations of wise judicial administration” and
“comprehensive disposition of litigation, ”
Montanore Minerals Corp. v. Bakie, 867 F.3d 1160,
1165 (9th Cir. 2017) (quoting Colo. River, 424 U.S.
at 817), the Yates read Colorado River too broadly:
“Abstention from the exercise of federal jurisdiction
is the exception, not the rule.” 424 U.S. at 813.
Federal courts are under a “virtually unflagging
obligation . . . to exercise the jurisdiction given them,
” id. at 817, and for that reason, the mere
“pendency of an action in the state court is no bar to
proceedings concerning the same matter in the Federal court
having jurisdiction.” Id. (quoting
McClellan v. Carland, 217 U.S. 268, 282 (1910)).
Colorado River, where there is a parallel, ongoing
state court proceeding, “courts may refrain from
deciding an action for damages only in
‘exceptional’ cases, and only ‘the clearest
of justifications’ support dismissal.” See,
e.g., R.R. St. & Co. v. Transp. Ins. Co.,
656 F.3d 966, 978 (9th Cir. 2011) (quoting Colo.
River, 424 U.S. at 818–19). Therefore, the
question here is whether “exceptional”
circumstances exist so as to warrant abstention. See