Wake Forest Law Review

By Ali Fenno

On February 21, 2017, the Fourth Circuit issued a published opinion in the civil case of vonRosenberg v. Lawrence. In vonRosenberg, the Fourth Circuit addressed whether the district court abused its discretion by staying a federal proceeding until the conclusion of a similar state action involving different parties and claims. After examining the abstention standard from Colorado River Water Conservation District v. United States, the Fourth Circuit vacated the abstention order and remanded the case back to the district court, holding that the district court abused its discretion by abstaining in favor of state court proceedings that were not parallel to the federal court proceedings.

Facts

Both this federal proceeding and the related state proceeding concerned whether the Diocese of South Carolina (the “Diocese”) dissociated itself from the Protestant Episcopal Church in the United States (the “Episcopal Church”). Bishop vonRosenberg, the federal plaintiff-appellant, claims that the Episcopal Church appointed him as Bishop of the Diocese after removing Bishop Lawrence, the federal defendant-appellee, from the position. But Bishop Lawrence contends that the Episcopal Church could not have removed him because the Diocese of South Carolina had dissociated from the Episcopal Church and acted independently of the organization. Thus, each party claimed to be the Bishop of the Episcopal Church in South Carolina.

State Claim

Litigation over the dissociation matter first began when the Diocese filed suit against the Episcopal Church in a South Carolina state court, claiming that the Diocese had dissociated from the Episcopal Church and sought “resolution of their real and personal property rights.” The Episcopal Church then counterclaimed for trademark infringement and dilution under the Lanham Act. It also requested that Bishop Lawrence and others be added as counterclaim defendants, but the state trial court denied the request in September 2013.

The state court issued its final order on February 3, 2015. It held that the Diocese had validly dissociated from the Episcopal Church and owned the property at issue, and permanently enjoined the Episcopal Church from using the Diocese’s marks. The Episcopal Church appealed, and the South Carolina Supreme Court heard oral arguments on September 23, 2013. No opinion from the state supreme court has yet been issued.

Federal Claim

Bishop vonRosenberg filed this federal action on March, 13, 2013, seeking declaratory-injunctive relief against Bishop Lawrence. He claimed that Bishop Lawrence violated the Lanham Act by falsely advertising himself as the Bishop of the Diocese. But the district court abstained the proceeding in favor of the state court proceedings in August 2013. The court reasoned that it had broad authority to decline jurisdiction on cases seeking declaratory relief. On appeal, the Fourth Circuit vacated the abstention order on the grounds that the district court had applied the wrong abstention standard; the district court should have applied the standard for actions involving both declaratory and non-declaratory relief from Colorado River Water Conservation District v. United States. The Fourth Circuit remanded the case so this correct standard could be applied.

On remand, the district court again abstained in favor of the state proceedings, and Bishop vonRosenberg appealed.

Failure to Meet the “Exceptional Circumstances” Abstention Standard

The Fourth Circuit began its analysis by establishing that Colorado River is a narrow standard; it requires that abstention of jurisdiction be justified by “exceptional circumstances.” The Fourth Circuit identified the first step in this “exceptional circumstances” test to be a determination of whether the state and federal cases are parallel. It listed three guiding principles for this determination: (1) the federal and state parties should have more in common than merely the litigation of substantially similar issues; (2) the parties themselves should be nearly identical; and (3) despite overlapping of facts, there must not be serious doubt that the state action would not resolve all the claims. The Fourth Circuit then noted that even if the if the factual circumstances are sufficiently parallel, Colorado River requires that a handful of procedural factors be balanced before abstaining.

In applying these principles to this case, the Court first observed that the parties in the two cases are not the same. Neither Bishop Lawrence nor Bishop vonRosenberg were parties to the state action. Furthermore, the two courts were not litigating the same claims. The state court looked only at the Episcopal Church’s false advertising claim, not that of Bishop vonRosenberg. Thus, because the state and federal cases involved different parties and different claims, the cases were not parallel as required by Colorado River‘s “exceptional circumstances” standard.

Conclusion

The Fourth Circuit concluded that the state and federal proceedings failed to meet Colorado River’s “exceptional circumstances” standard because, as they involved different parties and different claims, they could not be considered parallel cases. Accordingly, it vacated the abstention order and remanded the case back to the district court.

 By Chad M. Zimlich

In a published civil opinion handed down on Tuesday, March 31, 2015, the Fourth Circuit in vonRosenberg v. Lawrence took on an action in the District Court for the District of South Carolina involving two bishops of The Protestant Episcopal Church in the Diocese of South Carolina (“The Church”).

The Leader of a Church, Trademark, and a Pending State Court Decision

The case centered on a dispute between two clergymen, both claiming to be the head of The Church. Bishop Charles G. vonRosenberg filed an action against Bishop Mark J. Lawrence, alleging two Lanham Act violations and seeking declaratory and nondeclaratory relief. In response, Bishop Lawrence asked the district court to abstain pending state court proceedings. Relying on the abstention doctrine and broad discretion articulated in Brillhart v. Excess Insurance Co. of America, and Wilton v. Seven Falls Co., the district court stayed the action.

A Power Struggle

Bishop vonRosenberg claimed that in December 2012, the Disciplinary Board of The Protestant Episcopal Church in the United States removed Bishop Lawrence from his position. Following this, a Convention of the Diocese elected and installed vonRosenberg as Lawrence’s replacement. He further claimed that Bishop Lawrence has improperly continued to use the Church’s service marks and falsely advertised himself as the leader of the Church.

Bishop Lawrence asserted that he was never actually removed from office, but that Bishop vonRosenberg was the leader of an “unincorporated Episcopal association created to supplant the Diocese.” As each party asserted they were the head of the Church, each felt entitled to use the Church’s trademarks.

On January 4, 2013, prior to the lawsuit in the district court, a faction of Bishop Lawrence’s supporters filed suit in state court against the Episcopal Church. In the suit, the supporters alleged “service mark infringement” and “improper use of names, styles, and emblems” all under South Carolina state law. The state court responded by issuing a temporary restraining order preventing anyone other than Bishop Lawrence and those under his direction from using these service marks and names.

Bishop vonRosenberg then filed against Bishop Lawrence in district court seeking declaratory and injunctive relief for two violations of the Lanham Act, 15 U.S.C. § 1114 and § 1125(a)(1)(A) (2012). He alleged that Bishop Lawrence violated the Lanham Act by the unauthorized use of four service marks belonging to the Diocese of South Carolina, as well as by falsely advertising himself as the real Bishop. Bishop Lawrence then filed to dismiss the federal action for lack of standing or, in the alternative, for the court to abstain and stay this action pending resolution of the state court case.

The district court granted Bishop Lawrence’s motion to abstain, finding that, while Bishop vonRosenberg had standing, the court had broad discretion to abstain and to decline to grant declaratory relief under Brillhart and Wilton. This appeal followed that decision.

The District Court Should Have Used Colorado River, and, Thus, Was In Error

The Fourth Circuit noted that, as the decision to abstain was a legal question, their review was de novo. Bishop vonRosenberg’s contention on appeal was that the district court should have applied Colorado River Water Conservation District v. United States, rather than Brillhart or Wilton.

Under Colorado River, a federal court may abstain from deciding non-frivolous, nondeclaratory claims in favor of a parallel state suit for reasons of “wise judicial administration” only in “exceptional” circumstances. The Court explained that a federal court has a duty to decide federal claims, and thus the decision to abstain due to “administrative reasons” was much more limited. Additionally, a court is to balance several factors, with the balance heavily against abstention. The district court, however, did not consider any factors, and instead relied solely on the Brillhart/Wilton standard.

The Fourth Circuit noted that, while they had never spoken to the issue of standards in regards to complaints asserting claims for declaratory and nondeclaratory relief, it has held that when a court must deal with a nondeclaratory claim, it is cannot abstain from the declaratory claim, making it an all-or-nothing deal.

The Court noted that “Colorado River permits a court to abstain only in the rare circumstance” where judicial administration was so “pressing” that it overrides the natural obligation of the court. Brillhart and Wilson’s broad discretion, however, flowed from the Declaratory Judgment Act, which runs contrary to circumstances where a court must exercise jurisdiction.

The Fourth Circuit concluded by stating that Colorado River “must guide a court’s decision to abstain from adjudicating mixed complaints alleging claims for both declaratory and nondeclaratory relief.”

Furthermore, the Colorado River standard would apply to all mixed claims, even those where the claims are ancillary to the request for declaratory relief. The only exception would be a case where the injunctive relief is frivolous or to attempt to forum shop.

Applied to This Case, Colorado River Means a Higher Standard and a New Review

Because the district court did not apply the Colorado River standard, the Court vacated the stay order and remanded the case to the district court to make a determination of whether, under the circumstances, the “exceptional” standard was met.