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Idt Corporation v. Krill

United States District Court, Third Circuit

November 4, 2013

IDT CORPORATION, Plaintiff,
v.
YOAV KRILL, Defendant.

OPINION

SUSAN D. WIGENTON, District Judge.

Before this Court is Defendant Yoav Krill's ("Krill") Motion to dismiss the Complaint filed by Plaintiff IDT Corporation ("IDT") or alternatively, stay this matter. Krill moves pursuant to the Brillhart/Wilton [1] abstention doctrine, requesting that the Court abstain from exercising its jurisdiction over this matter, or in the alternative, stay the herein matter during the pendency of parallel state court litigation. This Court has jurisdiction pursuant to 28 U.S.C. § 1332. Venue is proper pursuant to 28 U.S.C. § 1391(b)-(c). This Court, having considered the parties' submissions, decides this matter without oral argument pursuant to Federal Rule of Civil Procedure 78. For the reasons stated below, Krill's Motion is DENIED.

I. FACTS

IDT is a Delaware corporation with its principal place of business in Newark, New Jersey. (Compl. ¶ 1.) Krill, a New York resident, was employed by IDT beginning on May 18, 1998, with a break in Krill's employment with IDT around April 2001 until approximately January 2003. ( Id. ¶¶ 2, 6.) As alleged in the Complaint, Krill was an at-will employee with IDT, and the nature of his employment involved business development. ( Id. ¶¶ 6-7.) IDT paid Krill a fixed annual compensation, and he also participated in IDT-sponsored employee benefit programs. ( Id. ¶ 7.) According to the Complaint, Krill never had a written contract or agreement with IDT relating to his employment at any point during his career with IDT. ( Id. ¶ 8.) IDT terminated Krill's employment on December 31, 2012, and alleges that he had received all compensation that he was owed up until the date of his termination. ( Id. ¶ 9.)

IDT alleges that an actual controversy exists between the parties because Krill has threatened to sue IDT for money to which he is not entitled. ( Id. ¶ 10.) As pled in the Complaint, on February 8, 2013, through counsel, Krill sent IDT's general counsel a letter alleging that IDT did not fulfill its obligations to Krill. ( Id. ¶ 11.) The letter does not refer to any written agreement between the parties and instead asserts that Krill was "entitled to recover an amount in excess of $2, 000, 000" from IDT. ( Id. ) Furthermore, the letter states that if the matter was not resolved to Krill's satisfaction, he would pursue all available legal remedies against IDT. ( Id. ¶ 12.) Conversely, IDT maintains that Krill is not entitled to any additional compensation or severance payment. ( Id. ¶ 15.) IDT bases these claims on the contention that Krill was an at-will employee of IDT, such that it could terminate Krill "at any time for any non-discriminatory reason, without paying Krill any further compensation." ( Id. ¶ 16.)

II. PROCEDURAL HISTORY

On March 12, 2013, IDT filed the Complaint commencing the herein matter in the United States District Court for the District of New Jersey, seeking a declaratory judgment ruling, inter alia, that: "(1) Defendant Krill has no valid and legally cognizable claim against IDT; (2) Defendant Krill was an at-will employee of IDT; (3) IDT is not required to pay any further compensation to Defendant Krill; [and] (4) IDT is not required to pay any severance to Defendant Krill." ( See id. )

On the same day, Krill, as plaintiff, filed a five-count Complaint in the Superior Court of New Jersey, Essex County, alleging that his wrongful termination resulted in: (1) a breach of express contract by IDT; (2) a breach of implied contract by IDT; (3) IDT's unjust enrichment; (4) a breach of an implied covenant of good faith and fair dealing by IDT; and (5) common law fraud by IDT and Howard Jonas ("Jonas"), IDT's chief executive officer and a resident of the State of New York (hereinafter, the "State Court Action"). ( See Compl., Krill v. IDT Corp., Docket No. ESX-L-002012-13). The gravamen of Krill's allegations in the State Court Action is that he and Jonas negotiated a severance agreement wherein Krill would receive $2, 500, 000 over a four (4) year period. ( Id. ¶¶ 10-13.) Jonas, on behalf of IDT, entered into the agreement, however, with full knowledge that IDT was unable to pay that sum of money. ( Id. ¶ 16.) Consequently, Krill filed the instant Motion, beseeching this Court to dismiss the federal court Complaint or in the alternative, stay this proceeding given the pendency of the State Court Action.

III. LEGAL STANDARD

Under the Declaratory Judgment Act (the "Act"), 28 U.S.C. § 2201, et seq., district courts possess discretionary power to retain jurisdiction over matters that otherwise have federal subject matter jurisdiction. In pertinent part, the Act states as follows:

In a case of actual controversy within its jurisdiction... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration....

Id. at § 2201(a). In the seminal case of Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942), the Supreme Court addressed the question of whether a district court should abstain from exercising jurisdiction conferred by the Act when a parallel action is pending in state court. See id. at 494-95. The Supreme Court makes clear in Brillhart that the mere existence of a parallel state court proceeding is not dispositive of whether the district court should abstain from deciding the matter; rather, district courts are instructed to assess the adequacy of the state court proceeding and to assess whether the controversy can better be settled in that forum. Id. at 495; United States v. Pa. Dep't of Envtl. Res., 923 F.2d 1071, 1075 (3d Cir. 1991). In making this assessment, the Supreme Court advises district courts to consider the following non-exclusive factors: 1) "the scope of the pending state court proceeding and the nature of defenses open there[, ]" 2) "whether the claims of all parties in interest can satisfactorily be adjudicated in that proceeding, [3] whether necessary parties have been joined, [and 4] whether such parties are amenable to process in that proceeding." Brillhart, 316 U.S. at 495. Thus, under the legal precepts annunciated in Brillhart, the decision whether to retain jurisdiction over a matter brought under the Act is left to the district court's sound discretion. See Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995).

In the years following Brillhart, a question emerged as to whether Brillhart's discretionary standard remained applicable, or whether a more stringent standard governed a district court's decision to abstain from hearing a matter. State Auto Ins. Cos. v. Summy, 234 F.3d 131, 133-34 (3d Cir. 2000); see Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 14 (1983) ("The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it.'") (citation omitted); Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817-20 (1976) (finding that since district courts have a "virtually unflagging obligation" to exercise their jurisdiction, district courts cannot abstain from hearing a case unless exceptional circumstances exist).

In Wilton, the Supreme Court removed all doubt as to whether Brillhart remained viable. The High Court reiterated that the Act is an enabling statute that "confers a discretion on the courts rather than an absolute right upon the litigant." Wilton, 515 U.S. at 287 (quoting Public Serv. Comm'n of Utah v. Wycoff Co., 344 U.S. 237, 241 (1952)). It pointed to the language of the statute, which explicitly states that a court " may declare the rights and other legal relations of any ...


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