RUSSELL W . MCMURRAY, JR., on behalf of himself and all others similarly situated v. Lodweijk J.r. De Vink

NON-PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-1346
RUSSELL W . MCMURRAY, JR., on behalf of himself and all others
similarly situated
v.
LODWEIJK J.R. DE VINK; ROBERT N. BURT; DONALD C. CLARK; JOHN A.
GEORGES; WILLIAM H. GRAY, III; WILLIAM R. HOWELL; LASALLE D.
LEFFALL, JR.; GEORGE A. LORCH; ALEX J. MANDL; MICHAEL I. SOVERN;
WARNER-LAMBERT CO.; AMERICAN HOME PRODUCTS CORP.
(D. C. N. J. No. 99-cv-05253)
ELLIOT WALSEY, derivatively on behalf of himself and all others
similarly situated
v.
LODEWEIJK J.R. DE VINK; ROBERT N. BURT; DONALD C. CLARK; JOHN A.
GEORGES; WILLIAM H. GRAY, III; WILLIAM R. HOWELL; LASALLE D.
LEFFALL, JR.; GEORGE A. LORCH; ALEX J. MANDL; MICHAEL I. SOVERN;
AMERICAN HOME PRODUCTS CORP.; WARNER LAMBERT CO.
(D. C. N. J. No. 99-cv-5499)
Elliot Walsey and Russell W. McMurray, Jr.,
Appellants
Appeal from the Judgment of the District Court
of the District of New Jersey
District Judge: Hon. Katharine Sweeney Hayden
Argued: November 7, 2001

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2
Before: BECKER, Chief Judge, McKEE and RENDELL, Circuit Judges
(Opinion filed: January 3, 2002)
RICHARD B. BRUALDI, Esq. (Argued)
THE BRUALDI LAW FIRM
29 Broadway, Suite 1515
New York, NY 10006
DAVID J. MANOGUE
SPECTER SPECTER EVANS & MANOGUE, P.C.
Koppers Building, 26th Floor
436 Seventh Avenue
Pittsburgh, PA 15219
Attorneys for Appellants
DENNIS J. BLOCK, Esq. (Argued)
CADWALADER WICKERSHAM & TAFT
100 Maiden Lane
New York, NY 10038
ELIZABETH J. SHER
PITNEY, HARDIN, KIPP & SZUCH
P.O. Box 1945
Morristown, NJ 07962
Attorneys for Appellees
OPINION OF THE COURT
McKEE, Circuit Judge.
Appellants Russell McMurray, Jr. and Elliot Walsey appeal an order by the District
Court for the District of New Jersey staying this diversity action in favor of concurrent

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3
litigation that is proceeding in state court in Delaware. Appellants rely upon Colorado
River Water Conserv. Dist. v. United States, 424 U.S. 800 (1976) and its progeny in
arguing that the district court abused its discretion by entering the stay. For the reasons
that follow, we will reverse.
I. Facts
These consolidated actions arise from an aborted takeover battle between
Appellees Warner-Lambert Company (“W arner”), and American Home Products
Corporation (“AHP”). Warner is a Delaware corporation, with its principal place of
business in New Jersey. It manufactures and sells pharmaceuticals world-wide. AHP
also manufactures pharmaceutical products, and is also a Delaware corporation with its
principal place of business in New Jersey.
On November 4, 1999, Warner announced an agreement to merge with AHP. The
merger was valued at approximately $70 billion. The merger agreement valued each
share of Warner stock at $83.55. The combined company was to have 20 directors, with
ten coming from Warner and ten from AHP. Warner’s CEO was to be CEO of the
combined company. AHP’s CEO was to be Chairman for 18 months, and was then to
step aside in favor of Warner’s CEO. The merger agreement also contained a liquidated
damage clause or “break-up fee” that required Warner to pay AHP $2 billion if Warner
terminated the agreement.
The same day the Warner/AHP merger was announced, Pfizer, Inc. another major
manufacturer of pharmaceutical products, disclosed a bid for an “unfriendly” takeover of

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4
Warner. Pfizer’s offer to Warner was for $82.4 billion, and valued Warner stock at
$96.40 per share, or $17.85 more per share than AHP’s offer. Pfizer’s offer was therefore
more favorable to Warner shareholders. Unlike the AHP agreement, however, the Pfizer
offer did not contain a provision for the Warner CEO or Warner directors to have a
position in the company that would have been formed by the merger.
The Warner/AHP merger agreement lead to a flurry of lawsuits, including the one
before us. Russell McMurray and Elliot Walsey (collectively, “the shareholders”) are
shareholders of Warner. On November 10, 1999, McMurray filed a shareholder class
action on behalf of Warner shareholders in the District Court for the District of New
Jersey against Warner and AHP. Shortly thereafter, on November 23, 1999, Walsey filed
a corporate derivative suit against Warner and AHP in the same court. The two
complaints both arise from the merger agreement between Warner and AHP, contain the
same facts and allegations, and rely exclusively upon Delaware law.
The shareholders’ complaint alleges that W arner directors initially refused to
pursue serious merger discussions with Pfizer in violation of their fiduciary obligation to
Warner’s shareholders. The alleged breach is based upon their reluctance to pursue
Pfizer’s substantially higher offer. According to the averments, Pfizer attempted merger
discussions with Warner on three previous occasions, but the Warner directors simply
refused to entertain the possibility. The complaints also claim that Warner breached its
fiduciary duty by agreeing to pay AHP the $2 billion break-up fee.

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1A New Jersey state case, Bass v. De Vink, Docket No. MRS-C-206-99, was also filed
against Warner and AHP by Warner shareholders in New Jersey Superior Court. Bass is
also based on the same facts and allegations as the McMurray and Walsey actions. On
January 7, 2000, the New Jersey court stayed the Bass action pending final judgment in
the Delaware state litigation. The New Jersey Superior Court, Appellate Division,
affirmed the stay. See Bass v. DeVink, 765 A.2d 247 (N.J. Super. Ct. App. Div. 2001).
2 “Administrative termination” appears to be an informal mechanism for clearing
dockets in the district courts of New Jersey. However, that method of disposing of cases
is not sanctioned by, or even mentioned in, the Federal Rules of Civil Procedure.
3 In February 2000, Warner and AHP announced that they had abandoned their
merger agreement, and shortly thereafter, Warner entered into a merger agreement with
Pfizer. That merger was finalized on June 19, 2000. However, for reasons that we
discuss below, the Pfizer merger does not moot this appeal.
5
In addition to the federal suits, other Warner shareholders also began filing suits
against Warner in state court in Delaware. To date, over 30 shareholder class action suits
are pending in the Delaware courts as well as one derivative action. The Delaware suits
were consolidated into Rosman v. De Vink, C.A. No. 17519-NC. The Delaware litigation
is based upon the same allegations and requests the same relief as the Walsey and
McM urray actions.1
Warner and AHP filed motions asking the district court to abstain in favor of the
litigation in Delaware state court, or in the alternative, to stay the proceedings while the
Delaware litigation was pending. The district court refused to abstain, but issued an order
“granting a stay and administratively terminating these cases.”2 McMurray and Walsey
filed a motion for reconsideration, which the district court denied. This appeal followed.3
II. Discussion
A. Jurisdiction

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4 28 U.S.C. § 1291 reads in relevant part: “The courts of appeals (other than the United
States Court of Appeals for the Federal Circuit) shall have jurisdiction of appeals from all
final decisions of the district courts of the United States. . . .”
6
Preliminarily, Warner and AHP argue that the district court’s stay was not a final
order under 28 U.S.C. § 1291,4 and that we therefore have no jurisdiction. However, that
issue has already been resolved by the Supreme Court. In Moses H. Cone Memorial
Hosp. v Mercury Construction, Corp. 460 U.S. 1 (1983), the district court stayed federal
litigation in favor of parallel proceedings in state court, and the propriety of that stay was
challenged on appeal. In analyzing the jurisdictional issue, the Supreme Court concluded
that “a stay of the federal suit pending resolution of the state suit meant that there would
be no further litigation in the federal forum; the state court’s judgment on the issue would
be res judicata.” 460 U.S. at 10. The Court held that the stay was therefore equivalent to
a dismissal because the defendant was “effectively out of [federal] court.” Id. at 10, 13.
We have previously held that the pertinent jurisdictional inquiry under Moses H.
Cone is whether the district court has surrendered its jurisdiction to the state court such
that the stay will have res judicata effect in subsequent litigation in state court. See
Spring City Corp. v. Am. Buildings Co., 193 F.3d 165, 171 (3d Cir. 1999). If it has that
effect, the order staying the federal litigation is final and appealable. Id.
Here, the issues raised in the Delaware litigation will be res judicata for purposes
of the federal adjudication. The defendants in the state and federal suits are the same, and
plaintiffs Walsey and McMurray are represented in the Delaware shareholder action.
Warner Br. at 6. Thus, a decision on the merits in state court will have a preclusive effect

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5 Warner also argues that the shareholders’ claims are moot because AHP did
eventually merge with Pfizer, and the Warner/AHP merger was never consummated.
Although Warner did not raise this challenge at the district court level, we will briefly
respond because mootness has jurisdictional implications. See Jersey Central Power &
Light v. Township of Lacey, 772 F.2d 1103, 1108 n.8 (3d Cir. 1985).
We conclude that while the shareholders’ injunctive claims are moot, the
damages’ claims are not, as the complaints also seek damages for the $2 billion break-up
fee in the WarnerAHP agreement. It is therefore irrelevant for purposes of our
jurisdiction that the plaintiffs also sought to enjoin the aborted merger with AHP in their
complaints.
6 We review the district court’s decision to enter that stay for an abuse of discretion.
See Ryan v. Johnson, 115 F.3d 193, 196 (3d Cir. 1997). However, to the extent that the
district court based the stay on an erroneous view of the law, our review is plenary. Id. at
196.
7
on the stayed federal case, putting the shareholders “effectively out of [federal] court.”
See Moses H. Cone, 460 U.S. at 10. The stay is therefore a final order that is reviewable
under § 1291.5
B. The Stay
The shareholders contend that the district court applied the wrong legal standard in
granting the stay. They insist that the abstention that resulted from the district court’s
order is inconsistent with Colorado River and its progeny, and that the stay was,
therefore, an abuse of discretion.6
Colorado River involved the application of the McCarran Amendment, 43 U.S.C.
§ 666, which waives the federal government’s sovereign immunity in water rights cases
and permits the United States to be joined in state suits involving those rights. The
United States had filed suit in federal district court seeking a declaration of certain water
rights. Shortly thereafter, one of the defendants in that declaratory action brought an
action against the United States in state court in an effort to adjudicate both state and

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8
federal claims pursuant to the provisions of the McCarran Amendment. Several of the
defendants in the federal action then attempted to dismiss the federal suit arguing that the
federal court lacked jurisdiction under the McCarran Amendment. The district court
never decided the jurisdictional issue, but did abstain in favor of the ongoing state
actions. The Supreme Court granted certiorari in an appeal from that abstention “to
consider whether the McCarran Amendment terminated jurisdiction of federal courts to
adjudicate federal water rights and whether, if that jurisdiction was not terminated, the
District Court’s dismissal was nevertheless appropriate.” Colorado River, 424 U.S. at
806.
The Supreme Court affirmed largely because of the federal policy reflected in the
McCarran Amendment. “The clear federal policy evinced by that legislation is the
avoidance of piecemeal adjudication of water rights in a river system. This policy is akin
to that underlying the rule requiring that jurisdiction be yielded to the court first acquiring
control of property.” Id. at 819. The Court reasoned that the policy against piecemeal
litigation reflected Congress’ assessment that state courts and state administrators had
more expertise in adjudicating water rights than federal courts. See Moses H. Cone, 460
U.S. at 16.
The Court considered four factors in determining if abstention was warranted: 1)
which forum first assumed jurisdiction over the property at issue, 2) the inconvenience of
the federal forum, 3) the desirability of avoiding piecemeal litigation, and 4) the order in
which jurisdiction was obtained in the concurrent forums. Colorado River, 424 U.S. at

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7Tabas requires the balancing of the following seven factors: 1) ease of access to
sources of proof; 2) availability of compulsory process for attendance of hostile
witnesses; 3) the possibility of viewing premises, if appropriate; 4) the enforceability of
any judgment rendered; 5) the efficiency of the litigation; 6) the progress of the litigation
already commenced in state court, and 7) the applicability of state and/or federal law. See
Tabas, 608 F. Supp. at 763. The shareholders refer to the resulting law as the “Tabas
Doctrine.”
9
818. In doing so, however, the Court stressed that “no one factor is necessarily
determinative.” Rather, the combination of these factors must be balanced against “the
obligation to exercise jurisdiction . . .”. Id. Once the balancing is completed, “[o]nly the
clearest of justifications will warrant dismissal [in favor of the concurrent state
litigation].” Id. at 818-19.
In Moses H. Cone, supra, the Court identified two additional factors that must be
considered. These additional considerations require the trial court to weigh: which
forum’s law provides the rule of decision, and the adequacy of the state proceeding in
protecting the parties’ rights. Moses H. Cone, 460 U.S. at 23, 26.
Here, the district court correctly noted that Colorado River states that a court may
abstain only in extremely limited circumstances. However, the court then proceeded to
make a distinction between abstaining and granting a stay. See A-1, Letter Opinion dated
October 26, 2000 at 2. The court concluded that our discussion of Colorado River in
Ryan v. Johnson, 115 F.3d 193 (3d Cir. 1997) furnished the most recent pronouncement
on the law of abstention. However, the court then relied upon several factors enunciated
in Tabas v. Mullane, 608 F. Supp. 759, 763 (D.N.J. 1985) in holding that a stay was
appropriate here even though it also held that abstention was not.7 See Letter Op. at 2.

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8Railroad Comm’n v. Pullman Co., 312 U.S. 496 (1941).
9The shareholders also argue that Tabas is not good law as it was based on “the
subsequently discredited plurality opinion in Will v. Calvert Fire Ins. Co., 437 U.S. 644
(1978).” Appellants Br. at 15. We need not discuss that issue because Tabas is a district
court decision, and not controlling. We do note, however, that the precise question in
Calvert Fire was whether a circuit court of appeals could properly issue a writ of
mandamus to compel a district court to exercise jurisdiction. See Will v. Calvert Fire Ins.
Co., 437 U.S. 644, 661 (1978). In Moses H. Cone the Supreme Court interpreted Calvert
Fire as reaffirming the Colorado River test. Moses H. Cone noted that although the
10
Compared with other forms of abstention, like Pullman,8 where a court is required
to dismiss the case, the Supreme Court expressly left open the question whether a federal
court should dismiss or stay its proceedings when ordering abstention because of
duplicative state court litigation. In Moses H. Cone, the Court stated:
[w]e have no occasion . . . to decide whether a
dismissal or stay should ordinarily be the preferred course of
action when a district court properly finds that
Colorado River counsels in favor of deferring to a parallel
state-court suit. We can say, however, that a stay is as much a
refusal to exercise federal jurisdiction as a dismissal. When a
district court decides to dismiss or stay under Colorado River,
it presumably concludes that the parallel state-court litigation
will be an adequate vehicle for the complete and prompt
resolution of the issues between the parties.
Moses H. Cone, 460 U.S. at 28. Thus, the District Court erred in concluding that, by
staying the case, it was not abstaining. The stay that was entered is nothing more than the
procedural mechanism for abstaining in favor of the concurrent state litigation.
We reject any notion that Tabas could properly establish a separate test for
abstention. The relevant inquiry must be guided by Colorado River and its progeny, not
Tabas, or principles extrapolated from it. We therefore reject any suggestion that Tabas
furnishes an analytical framework for a stay distinct from Colorado River.9

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decision to exercise jurisdiction was reversed in Calvert Fire, the reversal was because
the proof needed for a writ of mandamus was inadequate, not because Colorado River is
no longer good law. See Moses H. Cone, 460 U.S. at 18.
11
It is well established in this Circuit that Colorado River governs motions to
dismiss on grounds of abstention. See, e.g., Ryan, 115 F.3d at 196 (applying Colorado
River to the motion to dismiss); Ingersoll-Rand, Corp. v. Callison, 844 F.2d 133, 137 (3d
Cir. 1988) (same); Western Auto Supply Co. v. Anderson, 610 F.2d 1126, 1127 (3d Cir.
1979) (same). We have consistently emphasized the narrowness of Colorado River, and
stressed that a federal court is usually statutorily obligated to exercise the jurisdiction that
Congress has bestowed. See Western Auto, 610 F.2d at 1127 (citing Colorado River and
Calvert Fire as emphasizing a court’s “unflagging obligation” to exercise jurisdiction);
see Kentucky W. Virginia Gas Co. v. Penn. Public Utility Comm’n, 791 F.2d 1111, 1118
(3d Cir. 1986) (noting in dicta that the movant did not meet the Colorado River standards
as there had been no showing of any congressional legislation evincing an intent to
circumscribe the plaintiff’s right to choose the federal forum).
In Ryan, we reversed a district court’s decision to abstain and dismiss an action in
favor of state litigation largely because there was no clear congressional policy against
piecemeal litigation that would have counseled in favor of abstention. See Ryan, 115
F.3d at 199. Ryan was a negligence suit involving state tort law. We stated that “[t]he
presence of garden-variety state law issues has not, in this circuit, been considered
sufficient evidence of a congressional policy to consolidate multiple lawsuits for unified
resolution in the state courts.” Id. at 198. We also cautioned that if the presence of

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12
concurrent litigation itself becomes the threshold test for meeting Colorado River’s
piecemeal litigation factor, then “the test becomes so broad that it swallows up the
century-old principle . . . that the 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 Colorado River, 424 U.S. at 817) (internal quotations omitted). That is precisely
the situation here.
We reaffirmed Ryan, supra, in Spring City Corp. In Spring City, we concluded
that no “exceptional circumstances” warranted a stay. Our decision focused in large part
upon the narrowness of the Colorado River doctrine as exemplified by its requirement of
a clear federal policy against piecemeal litigation. We again noted that such a policy is a
prime consideration in any attempt to overcome a federal court’s obligation to exercise
jurisdiction. See Spring City, 193 F.3d at 172. We also explicitly stated that “Ryan
represents the applicable law under Third Circuit and Supreme Court precedent”
regarding abstention. Id.
We perceive no distinction between the circumstances here, and the circumstances
that were insufficient to justify abstention in Ryan. In fact, only the fourth Colorado
River factor--the order in which jurisdiction was obtained--weighs in favor of abstention
here. That factor does not turn upon “which complaint is filed first, but rather [on]. . .
how much progress has been made in the two actions.” Moses H. Cone, 460 U.S. at 21.
We are advised without contradiction that
the Delaware Litigation proceeded on an expedited schedule. .
. . [T]he plaintiffs in the Delaware Litigation moved with

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10 In support of its argument that this case evinces a congressional policy against
piecemeal litigation, Warner mentions in its brief that the Securities Litigation Uniform
Standards Act (“SLUSA”) requires remand to state court of any action removed from
federal court. Warner Br. At 28. However, this is not a remanded action and the
shareholders here do not allege a SLUSA violation in their Complaints or in their briefs.
Thus, whatever congressional policy may be evidenced in SLUSA is not implicated here.
13
expedition. Court conferences were held; voluminous
documents were requested and produced; interrogatories
propounded, objected to and answered; and some twenty
depositions were taken. The Court of Chancery ruled upon
multiple discovery and scheduling issues. Indeed, discovery in
the Delaware Litigation is largely, if not altogether, complete.
Warner Br. at 7. This does not weigh heavily in the balance however, given our
consideration of all of the other Colorado River/Moses H. Cone factors and the absence
of a federal policy against piecemeal litigation that was so important to our inquiry in
Ryan.10
There has been no assumption of jurisdiction over property here so that is not
relevant to our analysis. The federal district court is situated in Newark, New Jersey. That
forum is not inconvenient as both Warner and AHP have their principle place of business
in New Jersey. Moreover, New Jersey and Delaware are neighboring states. Even if we
were to assume that the participants must travel to New Jersey from the most distant part
of Delaware, we would be hard put to define the resultant travel as imposing such a
hardship that a federal court in New Jersey would be inconvenient for purposes of
Colorado River. In addition, there is no credible allegation that this litigation involves
anything more than garden-variety state corporate law issues.

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14
Appellees seize upon the fact that the issues here are controlled by Delaware law,
and they remind us of the expertise of Delaware courts in resolving issues of corporate
law and shareholders’ rights. We share the appellees’ high regard for the courts and
jurists of Delaware, and we are well aware of the unique stature of corporate law in
Delaware. However, that is not a sufficient reason for a federal court to refrain from
exercising its jurisdiction.
Moreover, “while the presence of federal issues militates against abstention, the
converse cannot be said; abstention cannot be justified merely because a case arises
entirely under state law.” Ryan, 115 F.3d at 199; see also Spring City, 193 F.3d at 172.
Furthermore, application of state law is not as important where, as here, the federal forum
is adequate to protect the parties’ rights. It is a far more important consideration when the
state court is an inadequate forum to protect the rights of the litigants. See Ryan, 115
F.3d at 200; Spring City, 193 F.3d at 172.
Given the parameters of Colorado River and Ryan, it is clear that the district court
abused its discretion in staying this litigation. It is ironic that the district court explained
the “alternative” relief here by stating: “[a]bstention would be an extreme and
inappropriate response. But a stay meets the proper concerns raised by the defendants,
and the motion for that relief is granted.” A-3. However, as we stated above, here there is
no distinction between abstaining from adjudicating the federal litigation on the one hand,
and staying it on the other. We therefore hold that the district court abused its discretion
by entering the stay.

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11Since we hold that the district court erroneously applied Tabas rather than Colorado
River and Ryan, it necessarily also follows that the district court erred in denying the
shareholders’ M otion for Reconsideration. See Local Civil Rule 7.1(g) (a motion for
reconsideration may be granted where the court has overlooked controlling decisions).
15
III. CONCLUSION
For the reasons set forth above, we will vacate the district court’s order and
remand for further proceedings on the merits.11
TO THE COURT:
Please file the foregoing opinion.
By the Court,
/s/ Theodore A. McKee
CIRCUIT JUDGE

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16
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-1346
RUSSELL W. MCMURRAY, JR., on behalf of himself and all others
similarly situated
v.
LODWEIJK J.R. DE VINK; ROBERT N. BURT; DONALD C. CLARK; JOHN A.
GEORGES; WILLIAM H. GRAY, III; WILLIAM R. HOWELL; LASALLE D.
LEFFALL, JR.; GEORGE A. LORCH; ALEX J. MANDL; MICHAEL I. SOVERN;
WARNER-LAMBERT CO.; AMERICAN HOME PRODUCTS CORP.
(D. C. N. J. No. 99-cv-05253)
ELLIOT WALSEY, derivatively on behalf of himself and all others
similarly situated
v.
LODEWEIJK J.R. DE VINK; ROBERT N. BURT; DONALD C. CLARK; JOHN A.
GEORGES; WILLIAM H. GRAY, III; WILLIAM R. HOWELL; LASALLE D.
LEFFALL, JR.; GEORGE A. LORCH; ALEX J. MANDL; MICHAEL I. SOVERN;
AMERICAN HOME PRODUCTS CORP.; WARNER LAMBERT CO.
(D. C. N. J. No. 99-cv-5499)
Elliot Walsey and Russell W. McMurray, Jr.,
Appellants
Appeal from the Judgment of the District Court
of the District of New Jersey
District Judge: Hon. Katharine Sweeney Hayden
Argued: November 7, 2001

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Before: BECKER, Chief Judge, McKEE and RENDELL, Circuit Judges
JUDGMENT
This cause came to be considered on appeal from the United States District Court
for the District of New Jersey, and was argued on November 7, 2001.
On consideration whereon, it is now ORDERED AND ADJUDGED by this Court
that the order of the stay entered by the District Court is hereby vacated, and the matter is
remanded to that court for further proceedings consistent with the attached opinion.
ATTEST:
CLERK
DATED

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