Gray v. Petoseed Company Inc ( 1997 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
WILLIAM H. GRAY,
Plaintiff-Appellant,
v. No. 96-1859
PETOSEED COMPANY, INCORPORATED,
Defendant-Appellee.
GLEN KINARD,
Plaintiff-Appellant,
v. No. 96-1860
PETOSEED COMPANY, INCORPORATED,
Defendant-Appellee.
JAMES W. WILLIAMS,
Plaintiff-Appellant,
v. No. 96-1861
PETOSEED COMPANY, INCORPORATED,
Defendant-Appellee.
WILLIAM H. GRAY,
Plaintiff-Appellee,
v. No. 96-1862
PETOSEED COMPANY, INCORPORATED,
Defendant-Appellant.
GLEN KINARD,
Plaintiff-Appellee,
v. No. 96-1863
PETOSEED COMPANY, INCORPORATED,
Defendant-Appellant.
JAMES W. WILLIAMS,
Plaintiff-Appellee,
v. No. 96-1864
PETOSEED COMPANY, INCORPORATED,
Defendant-Appellant.
Appeals from the United States District Court
for the District of South Carolina, at Beaufort.
Dennis W. Shedd, District Judge.
(CA-95-3882-9-19, CA-95-3883-9-19, CA-95-3884-9-19)
Submitted: July 15, 1997
Decided: November 18, 1997
Before WILKINS, HAMILTON, and MICHAEL, Circuit Judges.
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Affirmed by unpublished per curiam opinion.
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COUNSEL
John Paul Detrick, Ronnie Lanier Crosby, PETERS, MURDAUGH,
PARKER, ELTZROTH & DETRICK, Hampton, South Carolina, for
Appellants. Keating L. Simons, III, Derek Farrell Dean, LAW
2
OFFICES OF KEATING L. SIMONS, III, P.A., Charleston, South
Carolina, for Appellee.
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Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
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OPINION
PER CURIAM:
Appellants William H. Gray, Glen Kinard, and James W. Williams,
watermelon farmers, filed actions against Petoseed Company, Inc., in
South Carolina state court asserting claims for fraud and compensa-
tory contempt. Petoseed removed the cases to district court. Appel-
lants appeal from the district court's orders dismissing their fraud
claims and denying their motion for reconsideration. Petoseed appeals
from the district court's orders remanding the contempt claims to state
court.
Appellants previously filed separate actions in state court against
Petoseed seeking damages for crop losses sustained as a result of
watermelon seeds Petoseed sold to Appellants. In those complaints,
Appellants claimed that Petoseed produced and sold to them seeds
contaminated with "Watermelon Fruit Blotch" disease that damaged
their watermelon crop for the year. Through interrogatories, Appel-
lants requested a description of all tests that Petoseed had performed
on the seeds to determine the nature of the alleged disease. Following
court orders compelling Petoseed to respond to the interrogatories,
Petoseed stated that its tests were negative for the existence of the
bacteria that caused Watermelon Fruit Blotch disease. Appellants,
relying on Petoseed's response to the interrogatories, settled their
claims against Petoseed and received consideration for releasing Peto-
seed from further liability. After their settlements, Appellants learned
that Petoseed had withheld material information during discovery.
Specifically, Petoseed failed to disclose test results of a small sample
of seeds that were positive for the bacteria known to cause Water-
melon Fruit Blotch.
3
In these consolidated actions, Appellants claimed that Petoseed's
alleged misrepresentation concerning its test results induced them to
settle their claims in the prior suits. Appellants further maintained that
Petoseed was in contempt of the state court for failing to disclose the
watermelon seed test results as required by court orders. Appellants
requested damages.
Petoseed removed these cases to district court and simultaneously
filed a motion to dismiss for failure to state a claim. Appellants
opposed the motion to dismiss and moved to remand, contending that
the district court lacked subject matter jurisdiction over their claims.
The district court determined that removal was proper. However,
the court remanded Appellants' contempt claims for lack of jurisdic-
tion, finding that those claims had to be brought before the court that
issued the order allegedly violated. The court dismissed Appellants'
fraud claims after finding that Appellants were required by state law
to tender and return the settlement amounts paid in connection with
the prior settlement in order to maintain their fraud claims in the pres-
ent actions. Appellants moved for reconsideration.
The court denied Appellants' motion and concluded that removal
was proper, subject matter jurisdiction existed, and dismissal of the
fraud claims was proper. Although the court ruled that it had subject
matter jurisdiction over the compensatory contempt claims, it none-
theless abstained from resolving the contempt claims under principles
of comity and respect for the state court, and consequently, remanded
the contempt claims to state court.
Appellants timely appeal the dismissal of the fraud claims1 and
Petoseed cross-appeals the remand of the contempt claims.2
Appellants argue that the district court lacked jurisdiction over the
contempt claims because the state court where the contempt occurred
has exclusive jurisdiction over the matter. They contend that if the
contempt claims were not removable, the entire action was not
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1 Nos. 96-1859/1860/1861.
2 Nos. 96-1862/1863/1864.
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removable, and therefore, the district court did not enjoy jurisdiction
over the fraud claims. We need not determine whether the district
court had jurisdiction over the contempt claims because the court did
not exercise jurisdiction over them.
Petoseed claims that the court had jurisdiction over the contempt
claims and it erred by abstaining from exercising jurisdiction. As
Petoseed notes, the authority of a federal court to abstain from exer-
cising its jurisdiction extends to all cases in which the court has dis-
cretion to grant or deny relief. See Quackenbush v. Allstate Ins. Co.,
___ U.S. ___, 64 U.S.L.W. 4379, 4383 (U.S. June 3, 1996) (No. 95-
244). However, the Supreme Court has "not held that abstention prin-
ciples are completely inapplicable in damages actions." Id. at 4386.
There are circumstances which require a federal court having jurisdic-
tion of an action to nonetheless abstain from deciding doubtful ques-
tions of state law. See, e.g., Louisiana Power & Light Co. v. City of
Thibodaux, 360 U.S. 25, 27-30 (1959). Further, the district court's
decision to abstain is reviewed for an abuse of discretion. See New
Beckley Mining Corp. v. International Union, United Mine Workers
of Am., 946 F.2d 1072, 1074 (4th Cir. 1991); Brandenburg v. Seidel,
859 F.2d 1179, 1195 (4th Cir. 1988); Kentucky W. Va. Gas Co. v.
Pennsylvania Pub. Util. Comm'n, 791 F.2d 1111, 1115 (3d Cir.
1986).
We find that the district court did not abuse its discretion by
abstaining from entertaining the contempt claims because the princi-
ple of comity applies to a case in which the state's contempt process
is involved. See Juidice v. Vail, 430 U.S. 327, 335 (1977). "A State's
interest in the contempt process, through which it vindicates the regu-
lar operation of its judicial system, so long as that system itself
affords the opportunity to pursue federal claims within it, is surely an
important interest." Id. Thus, federal-court interference with the
state's contempt process is an offense to the state's interest. Id. at 336.
The court correctly abstained from hearing the contempt claims
because Petoseed's alleged defiance of the state court orders places
the integrity of that court at stake. Further, the state court has the
authority and ability to fashion an appropriate remedy if it finds Peto-
seed in contempt of its orders. It would be a serious interference with
the orderly administration of justice for the district court to decide
when a state court order has been violated and how it should be reme-
5
died. See Ulmet v. United States, 888 F.2d 1028, 1031 (4th Cir. 1989);
Feller v. Brock, 802 F.2d 722, 728 (4th Cir. 1986); Gregory-Portland
Indep. Sch. Dist. v. Texas Educ. Agency, 576 F.2d 81, 83 (5th Cir.
1978). Although there is no pending state litigation in this case, the
principles of comity apply because the state nonetheless has an impor-
tant interest in its contempt process and interfering with that process
would unduly interfere with the legitimate activities of the state. See
Juidice, 430 U.S. at 336. Therefore, the district court correctly
abstained from entertaining the contempt claims and remanded them
to state court.
The district court had subject matter jurisdiction over Appellants'
fraud claims because the statutory requirements for diversity jurisdic-
tion were met. Only civil actions over which the district court would
have "original jurisdiction" if filed in district court may be removed.
Hunter Douglas Inc. v. Sheet Metal Workers Int'l Ass'n, Local 159,
714 F.2d 342, 345 (4th Cir. 1983). District courts have original juris-
diction of civil actions where the value in controversy exceeds
$50,000 and is between citizens of different states. 28 U.S.C.
§ 1332(a) (1994).3 As the party seeking to invoke the jurisdiction of
the federal court, Petoseed bore the burden of establishing that diver-
sity jurisdiction existed. See McNutt v. General Motors Acceptance
Corp. of Ind., 298 U.S. 178, 189 (1936). It is undisputed that in each
action filed by Appellants the parties are of diverse citizenship and
the amount in controversy exceeds $50,000. Thus, Petoseed has car-
ried its burden of showing that the court had diversity jurisdiction
over the claims.
Appellants' claims are severable because they alleged two action-
able wrongs: fraudulent inducement to settle their prior lawsuits and
violation of court orders by Petoseed entitling them to damages. See
American Fire & Cas. Co. v. Finn, 341 U.S. 6, 13 (1951); Able v.
Upjohn Co., 829 F.2d 1330, 1332 (4th Cir. 1987). 4 Further, there is
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3 The 1996 Amendment to § 1332 increased this amount to $75,000.
See 28 U.S.C.A. § 1332 (West Supp. 1997). However, because the case
was removed to federal court before the effective date of the amendment,
we employ the $50,000 amount.
4 We make no ruling as to whether state law provides for civil compen-
satory contempt damages.
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no statutory authority which precluded the district court from severing
the claims and retaining jurisdiction over one while remanding the
other.
Lastly, Appellants claim that to the extent the district court had
jurisdiction over the fraud claims, it erred by dismissing them.
Because the district court exercised diversity jurisdiction over the
fraud claims, state law was controlling. The South Carolina Supreme
Court has stated that when a party to a compromise settlement wishes
to avoid a valid release and be restored to his original rights, he must
restore the other party to his original position by returning or offering
to return the consideration received under the compromise. See Jones
v. Massingale, 163 S.E.2d 217, 219 (S.C. 1968); see also Dunaway
v. United Ins. Co. of Am., 123 S.E.2d 353 (S.C. 1962); Taylor v. Pal-
metto State Life Ins. Co., 12 S.E.2d 708 (S.C. 1940); State Farm Mut.
Auto. Ins. Co. v. Turner, 399 S.E.2d 22, 23 (S.C. Ct. App. 1990).
Therefore, because Appellants failed to tender the settlement amounts
they received in the prior suits, the district court correctly found that
they could not maintain their fraud claims in the present action.
Accordingly, we affirm the district court's orders remanding
Appellants' claims for compensatory contempt to state court, dismiss-
ing Appellants' fraud claims, and denying Appellants' motion for
reconsideration. We further deny Appellants' motion for certification
of state law to the South Carolina Supreme Court. We dispense with
oral argument because the facts and legal contentions are adequately
presented in the materials before the court and argument would not
aid the decisional process.
AFFIRMED
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