PURE DEVELOPMENT, INC. et al v. CANOPY 5, LLC et al

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
PURE DEVELOPMENT, INC., et al., )
)
Plaintiffs, )
)
v. ) No. 1:25-cv-01301-SEB-TAB
)
CANOPY 5, LLC, et al., )
)
Defendants. )
ORDER ON DEFENDANTS' MOTION TO STAY
Defendants Canopy 5, LLC, Chris Seger ("Seger"), Adam Seger ("Adam Seger"), Brian
Palmer, and Magic Tric I, LLC (collectively, the Canopy 5 Defendants) ask the Court to stay its
proceedings pursuant to the Colorado River abstention doctrine.1 [Filing No. 22.] Plaintiffs
Pure Holdings, Inc., Pure Development, Inc., and Drew Sanders oppose the requested stay.2
[Filing No. 28; Filing No. 63.] For the reasons discussed below, the Court grants the Canopy 5
Defendants' motion [Filing No. 22] and stays this case.
1 Though Defendants' motion is titled "Motion to Stay Injunctive Relief Proceedings," the Court
understands the motion, in substance, to request a stay of the entire case. Indeed, when the Court
first addressed this motion, and granted it in part, the Court concluded that the motion sought to
"stay the federal case while awaiting the outcome of the appeal of the state court's dissolution
order." [Filing No. 23, at ECF p. 3.]
2 Plaintiffs joined Defendants Magic ATX I, LLC, JennaB, LLC, and Jenna Barnett as parties after
briefing on the motion to stay concluded, and those newly-added Defendants have not formally
stated their position. However, Barnett is now also represented by the same defense counsel who
filed the motion to stay. Counsel for JennaB and Magic ATX has yet to appear.
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I. Background
Sanders and Seger started Pure Development, a real estate development company, in
2012. [Filing No. 22-1, at ECF p. 15.] They were 50-50 partners in Pure Development.3 In
recent years, Sanders and Seger became deadlocked regarding key operations, leading Seger to
file for dissolution in Indiana state court in June 2024, Case No. 48C06-2411-PL-156.4 [Filing
No. 22-1, at ECF p. 13.]
In the dissolution action, Seger sought to alter the ownership of Pure Development
through corporate dissolution. Seger's proposed dissolution plan excluded Sanders from
business operations and involved the creation of a new company, Canopy 5—owned by Seger,
Palmer, and Seger's brother, Adam Seger—to assume the work and hire the employees of Pure
Development, with Canopy 5 remitting a percentage of profits from Pure Development's
outstanding projects to be split equally between Seger and Sanders. [Filing No. 28-6, at ECF p.
30.] The state court rejected Seger's plan. [Filing No. 28-6, at ECF p. 44-46.] As his proposed
dissolution plan, Sanders presented evidence of the value of Pure Development and asked the
state court to order Seger to purchase his 50% share. [Filing No. 28-6, at ECF p. 47.] The state
court rejected this plan as well. [Filing No. 28-6, at ECF p. 47.] Following a trial in February
2025, the state court ordered the dissolution of Pure Development and ordered the appointment
of a receiver to manage the day-to-day affairs and exercise all powers of Pure Development "in
3 Pure Holdings is a related holding company, also formed by Sanders and Seger as a 50-50
partnership. [Filing No. 22-1, at ECF p. 16-17.] Because Pure Development is the operating entity,
this order focuses on it.
4 As discussed in the parties' briefs, there are additional actions pending related to Pure
Development. However, consideration of those actions was not necessary to determine the
appropriateness of the stay. Therefore, this order focuses on the state court's dissolution action and
this federal action.
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the best interests of the shareholders and creditors." [Filing No. 28-6, at ECF p. 47-48.] The
dissolution order required Pure Development to finish some projects according to their respective
operating agreements and to wind up the business—allowing the receiver to sell Pure
Development as an ongoing concern or liquidate it in another fashion, as dictated by the market
and at the discretion of the receiver. [Filing No. 28-6, at ECF p. 2-3, 47-48.]
Sanders promptly appealed the dissolution order, and the Indiana Court of Appeals stayed
the dissolution order before the appointment of a receiver—placing the ownership and control of
Pure Development in limbo. [Filing No. 22-3.] That appeal is pending.
In this federal action, filed in June 2025, Sanders—as well as Pure Development and its
holding company—originally asserted claims against Seger; Seger's new companies, Canopy 5
and Magic TRIC; Adam Seger; and the chief operating officer of Canopy 5, Brian Palmer. Adam
Seger and Palmer are past employees of Pure Development. [Filing No. 1, at ECF p. 3.] Sanders
alleges that—prior to their resignations—Seger, Adam Seger, and Palmer worked on behalf of
Canopy 5, while utilizing Pure Development's offices, resources, and trade secrets and engaging
"in efforts to transition Pure Development, Inc. projects and clients to Canopy 5." [Filing No. 1,
at ECF p. 3.] Sanders also alleges that Seger, with the assistance of Adam Seger, expropriated
Pure Development's business opportunities for Magic TRIC. [Filing No. 1, at ECF p. 6-10.] The
original complaint asserted 22 causes of action, including violations of state and federal trade
secrets laws, various violations of the Indiana Crime Victims Relief Act (based on claims of
theft, conversion, trespass, and fraud), unfair competition under common law and federal statute,
unjust enrichment, tortious interference with business relations and contracts, breach of
employment contracts, breach of fiduciary duty, fraud, and claims for declaratory relief.
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In July 2025, Pure Development moved for a preliminary injunction. [Filing No. 17.]
About a week later, the Canopy 5 Defendants moved to stay these proceedings or, alternatively,
for leave to complete discovery before responding to the motion for preliminary injunction.
[Filing No. 22.] Following a July 24, 2025, status conference, the Court opened discovery
related to the motion for preliminary injunction and took the requested stay under advisement
pending full briefing. [Filing No. 23.]
In September 2025, Plaintiffs filed a second amended complaint—adding three additional
Defendants, Magic ATX (an additional business started by Seger), Jenna Barnett (a past
employee of Pure Development), and JennaB (Barnett's business). [Filing No. 59.] The second
amended complaint—now the operative complaint—asserts claims similar to those in the
original complaint and further alleges that Barnett and her business violated federal and state
trade secrets laws, among other claims, and that Magic ATX committed constructive fraud.
[Filing No. 59.] Thereafter, Plaintiffs filed a superseding motion for preliminary injunction in
October 2025. [Filing No. 73.] Plaintiffs seek, among other things, to enjoin Defendants from
soliciting business from clients that originated from Pure Development and from keeping or
using Pure Development's business information. [Filing No. 73.]
The Canopy 5 Defendants' motion to stay argues that, under the Colorado River
abstention doctrine, the Court should decline to exercise jurisdiction and stay its proceedings
while awaiting the outcome of the appeal of the state court's dissolution order. [Filing No. 22, at
ECF p. 22.] They argue that the Indiana Court of Appeals should determine the propriety of the
state court order dissolving Pure Development and requiring a receiver to wind up its operations
before this Court issues orders—such as orders enjoining competition—that may further
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implicate or hinge on Pure Development's property rights and ability to engage in new business.
[Filing No. 22, at ECF p. 8-9.]
II. Discussion
Generally, a federal court retains jurisdiction of a case despite the pendency of a related
state court proceeding. Colorado River Water Conservation Dist. v. U.S., 424 U.S. 800, 817
(1976). However, under the Colorado River abstention doctrine, a federal court may stay or
dismiss a lawsuit due to a concurrent state proceeding if it would promote "wise judicial
administration" due to the parallel nature of the proceedings and the existence of exceptional
circumstances. Id. at 818. The purpose of Colorado River abstention is to "conserve both state
and federal judicial resources and prevent inconsistent results." Freed v. J.P. Morgan Chase
Bank, N.A., 756 F.3d 1013, 1018 (7th Cir. 2014).
Courts apply a two-step analysis to determine whether Colorado River abstention applies.
First, they assess "whether the concurrent state and federal actions are actually parallel." GeLab
Cosmetics LLC v. Zhuhai Aobo Cosmetics Co., Ltd., 99 F.4th 424, 428 (7th Cir. 2024) cert.
denied, 145 S.Ct. 1045 (2025). Then, courts assess "whether exceptional circumstances warrant
abstention." Id. When applying this analysis, courts "put a thumb on the scale against
abstention." Id. The moving party must prove that abstention is appropriate. Adkins v. VIM
Recycling, Inc., 644 F.3d 483, 497 (7th Cir. 2011). The Court discusses the two-step analysis in
more detail below.
a. Parallel Proceedings Requirement
"Cases are parallel if there is a substantial likelihood that the state litigation will dispose
of all claims presented in the federal case." GeLab, 99 F.4th at 428. However, parallel cases
"need not be identical." Id. Cases are parallel if they involve "substantially the same parties . . .
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contemporaneously litigating substantially the same issues." Id. (quoting Freed, 756 F.3d at
1019). Cases are parallel and Colorado River abstention is appropriate when a state action will
decide "the larger dispute" that "must be resolved before the district court can reach" the claims
raised in the federal action. Id. at 429-30 (citing Freed, 756 F.3d at 1021).
Defendants relied on GeLab when arguing that Plaintiffs' federal claims are parallel to the
dissolution action because "where the federal claims rise or fall with the outcome of a state court
ruling—that squarely militates in favor of finding of Colorado River parallelism." [Filing No.
30, at ECF p. 4.] The Court agrees. GeLab is controlling on the issue of parallelism.
GeLab involved a state action regarding the disputed ownership of a business—
specifically, the parties sought a declaration identifying the majority stakeholder. 99 F.4th at
427-29. The contemporaneous federal action raised claims under federal and state trade secrets
acts, as well as various common law causes of action. Id. at 427. Like the present case, the
federal plaintiff alleged that the defendants stole key trade secrets from a company whose
ownership and control was at issue in a state action and used those secrets in a competing
business. Id. In their defense, the federal defendants argued that, as the majority shareholder,
they owned the business and could not steal trade secrets from themselves. Id. The district court
concluded that the federal action was "ostensibly about trade secrets, but lurking just beneath the
surface is a corporate-ownership dispute"—the same issue "at center stage" in the state action—
and stayed the suit under the Colorado River abstention doctrine. Id. at 425-26. The Seventh
Circuit agreed and affirmed the stay. Id. at 426.
GeLab concluded that the parties were substantially the same even though the named
parties in the federal and state actions were not identical. Id. at 428-29. There was some overlap
of parties, but "each suit [had] defendants unique to that suit." Id. at 428. The Seventh Circuit
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acknowledged that the plaintiffs in both suits had "logical reasons" to sue some parties in one
suit but not the other, and therefore, the naming of different parties was not merely an attempt to
circumvent Colorado River abstention. Id. However, "formal symmetry [of parties was]
unnecessary." Id. at 429 (quoting Adkins, 644 F.3d at 499). Rather, parties are substantially the
same if they "have nearly identical interests." Id. (citing Freed, 756 F.3d at 1019). The Seventh
Circuit concluded that the parties had nearly identical interests because they sought the same
relief in both cases. Id. The state plaintiff wanted the state court to find that he owned the
company—"the same thing he hope[d] to show in federal court in order to prevail on his trade-
secrets claims." Id. The defendants' interests in both actions also hinged on ownership of the
business. Id. If the federal court found that the defendants owned a majority interest, then it
would render the federal action "senseless" by effectively alleging that a company was stealing
from itself. Id.
GeLab also found that the actions involved substantially the same issues because the
issues arose "from the same set of facts." Id. at 429 (citing Freed, 756 F.3d at 1019). "[T]he
ownership dispute at the heart of both cases [was] predicated on the same facts" and would "be
resolved largely by reference to the same evidence." Id. (internal quotations and citation
omitted). This was true even though only the federal action required evidence of the business's
trade secrets, because the relevance of the trade secret evidence hinged on the state court's
resolution of ownership. Id.
Also, the state court's resolution of ownership could affect the scope and the nature of the
issues in the federal action in a manner that could jeopardize federal jurisdiction. Id. at 429. If
the state court determined the federal plaintiff had a minority—not majority—share, then he
could still sue the federal defendants. Id. However, it "would be a different suit entirely—one
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bringing claims for breach of duty and corporate waste, not for violations of trade-secrets law."
Id. Federal subject matter jurisdiction in GeLab was based solely on federal question jurisdiction
supported by the Defend Trade Secrets Act claim. Id. Given the likelihood that the state
litigation would dispose of the federal trade secrets claim—the sole basis for subject matter
jurisdiction—"the critical issue would shift from the propriety of abstention to the existence of
subject-matter jurisdiction." Id. In that event, the plaintiff would lose his basis for federal
question jurisdiction. Id. ("[The plaintiff] would need to tether his state-law claims to some other
federal claim, and none comes readily to mind.").
In GeLab, the Seventh Circuit acknowledged that, depending on how the state court ruled
on the ownership issue, the federal trade secret claim could survive the resolution of the state
action. Id. at 429-30. However, it concluded that "'this one-sidedness is neither unusual nor fatal
to a finding that the two cases are parallel.'" Id. at 429 (quoting Loughran v. Wells Fargo Bank,
N.A., 2 F.4th 640, 649 (7th Cir. 2021)). Even if the state court's resolution of the ownership
dispute did not resolve all federal claims, the issue of ownership required resolution before the
district court could resolve the federal trade secrets claim. Id. at 429-30. Therefore, "it was
rational for the district court to determine that the state court litigation will be an adequate
vehicle for the complete and prompt resolution of the larger dispute." Id. at 430 (citing Freed,
756 F.3d at 1021) (internal quotations omitted).
The case here is remarkably similar to GeLab. Like GeLab, the present case raises a
federal Defend Trade Secrets Act claim but "lurking just beneath the surface is a corporate-
ownership dispute" that is already advancing in the state action. GeLab, 99 F.4th at 425. The
dissolution order resolved the key issues of the ownership and control of Pure Development.
While that decision is stayed pending appeal, the Indiana Court of Appeals may affirm and
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reinstate the dissolution order or issue another decision affecting the ownership and control of
Pure Development. If affirmed, a yet-to-be-appointed receiver would decide whether to pursue
the federal trade secrets and other claims raised by Pure Development in this case. Affirmation
of the dissolution order would also clarify that neither Seger nor Sanders have the right to act on
behalf of or control the tangible and intangible assets of Pure Development.
If the state action ultimately came to some other decision regarding the ownership of Pure
Development, it would still affect the ownership of trade secrets at issue in the federal action.
For instance, if the state action adopted a plan similar to Seger's dissolution proposal—giving
control of Pure Development's assets and operations to Canopy 5—then it would resolve the
federal claims. Canopy 5 would likely not pursue the federal trade secrets and other federal
claims against itself or its allies—rendering the federal action "senseless." GeLab, 99 F.4th at
429. If the state action ultimately resolves ownership of Pure Development in a way that does
not fully resolve the federal claims, then the parties can litigate the remaining federal claims after
the state court resolves the ownership dispute. Either way, the state court's resolution of
ownership of Pure Development is necessary before the resolution of the claims raised in this
federal action, and abstention furthers the interest of wise judicial administration.
Additionally—like GeLab—the state court's resolution of ownership could change the
nature and scope of the litigation and potentially give rise to jurisdictional issues. Subject matter
jurisdiction in this case is based on a federal question, not the diversity of the parties. [Filing No.
59, at ECF p. 2; Filing No. 30, at ECF p. 8.] The federal claims may not survive the resolution
of the state action, or the person or entity that ultimately controls Pure Development, such as a
yet-to-be-named receiver, may choose not to pursue the claims securing this action's federal
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question jurisdiction. Thus, resolution of the state action could lead to issues of subject matter
jurisdiction.
Also instructive is Freed v. J.P. Morgan Chase Bank, 756 F.3d 1013, 1016 (7th Cir.
2014), in which the Seventh Circuit affirmed a stay of two federal actions under the Colorado
River abstention doctrine. In a state action, deadlocked member-managers of a company asserted
various claims against one another and one employee, including a claim to dissolve the company.
Id. at 1016-17. One of the member-managers then filed a second state action against a bank that
allegedly facilitated the other member-manager's improper conversion of company assets. Id. at
1017. The action against the bank was removed to federal court. Id. Later, one of the member-
manager's filed a federal action against his co-member-manager, the co-member-manager's
father, and the company to force the purchase of the co-member-manager's interest in the
business and for monetary damages for alleged theft and breaches of fiduciary duties. Id. The
defendants in both federal actions moved to stay the federal actions pursuant to Colorado River
abstention. Id. The Seventh Circuit agreed that the actions were parallel because the parties'
interests and the issues were substantially the same. Id. at 1019-21 (finding that the federal
action against the bank was parallel because it stemmed from the "exact scheme and conduct" at
issue in the state action, which involved allegations that one member-manager was attempting to
eliminate the control of the other and take business assets without authorization). Moreover—
like in GeLab—the state court's resolution of key issues was necessary for the resolution of the
federal actions. Freed, 756 F.3d at 1021.
In the present case, Plaintiffs primarily base their arguments that the federal and state
actions are not parallel on the general presumption against abstention. However, despite that
presumption, many courts—in addition to GeLab and Freed—have found concurrent actions
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parallel and abstention appropriate. Indeed, Plaintiffs cited several such cases, including
Colorado River, Clark v. Lacy, 376 F.3d 683 (7th Cir. 2004), and Antosh v. Village of Mount
Pleasant, 99 F.4th 989 (7th Cir. 2024). [Filing No. 28, at ECF p. 3, 5; Filing No. 63, at ECF
p. 1.]
In Colorado River, the U.S. Supreme Court emphasized federal courts' "virtually
unflagging obligation . . . to exercise the jurisdiction given them." 424 U.S. at 818. However,
the Court ultimately upheld the district court's dismissal of the concurrent federal action under its
newly formed abstention doctrine. Id. at 821. In reaching that decision, the Court noted that
actions that "essentially involve the disposition of property are best conducted in unified
proceedings" and deferred to the state action. Id. at 819.
In Clark, the Seventh Circuit found federal and state actions to be parallel despite
differing parties because the parties were substantially the same and the actions shared a central
issue. 376 F.3d at 688-87 ("[T]he parallel nature of the actions cannot be destroyed by simply
tacking on a few more defendants, neither can it be dispelled by repackaging the same issue
under different causes of action."). In affirming the district court's stay, the Seventh Circuit
emphasized the practical benefits of staying an action under the Colorado River abstention
doctrine: "[A] stay is a measured approach that protects the substantial rights of the parties and
allows [the plaintiff] the possibility of continuing [the] litigation once [the state action
concludes.]" Id. at 688.
In Antosh, the Seventh Circuit affirmed a dismissal under the Colorado River abstention
doctrine. 99 F.4th at 991. While still acknowledging that abstention "is the exception, not the
rule," it noted that courts have "never demanded an exact fit between the federal and state cases"
and described the abstention analysis as a "flexible" inquiry requiring "practical judgment
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informed by principles of comity, federalism, and sound judicial administration." Id. at 994
(internal quotations and citations omitted). The federal and state actions in Antosh involved
different issues and some different parties, and resolution of the state action would not resolve all
federal claims. Id. at 994-95. Despite that, both actions hinged on the same operative facts, and
the parties unique to the federal action had incentives and goals aligned with those in the state
action. Id. at 994 ("The relevant inquiry is 'whether the addition of new parties with different
interests alters the central issues in the concurrent case.'" (quoting Loughran, 2 F.4th at 648)).
The Seventh Circuit found the actions to be parallel. Id. at 995.
Like many of the Seventh Circuit cases discussed above, this federal action involves
some unique parties, but those parties have interests that are nearly identical to those in the state
action. All parties to the state action—Pure Development, Pure Holdings, Seger, and Sanders—
are parties to this federal action. Some of the Defendants unique to the federal action were key
figures in the state action—such as Palmer, Adam Seger, and Canopy 5, which were central to
Seger's proposed dissolution plan. The interests of the remaining unique Defendants—Magic
TRIC, Magic ATX, Jenna B, and Barnett—hinge on the resolution of the ownership dispute. All
Defendants have a common interest—that the state court will find that Sanders and Canopy 5
have the right to compete with and access assets of Pure Development. For instance, the second
amended complaint [Filing No. 59, at ECF p. 39-41] alleges that Jenna B and Barnett (and other
Defendants) violated federal law by misappropriating trade secrets owned by Pure
Development—a claim which depends on the state court's resolution of who owns and controls
those trade secrets. Indeed, all claims raised in the federal action depend on who owns, controls,
and can grant access to Pure Development and its assets and whether Pure Development can
pursue new business. Even those claims alleging that Defendants' actions since the issuance of
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the dissolution order violated a fiduciary duty to Pure Development depend on the outcome of
the appeal of the dissolution order. This federal action is parallel to the state dissolution action.
b. Exceptional Circumstances Requirement
The second inquiry under the Colorado River abstention doctrine is whether exceptional
circumstances warrant abstention, which requires consideration of a ten-factor balancing test.
GeLab, 99 F.4th at 430. "No one factor is necessarily determinative; a carefully considered
judgment taking into account both the obligation to exercise jurisdiction and the combination of
factors counselling against that exercise is required." Colorado River, 424 U.S. at 818–19. "The
weight to be given any one factor is determined solely by the circumstances of the particular
case—there is no mechanical formula by which to determine when a stay is appropriate."
Schneider Nat. Carriers, Inc. v. Carr, 903 F.2d 1154, 1157 (7th Cir. 1990); see also Clark, 376
F.3d at 688 (noting that the ten-factor balancing test has a "flexible nature"). The Court discusses
each factor below.
1. Whether the state has assumed jurisdiction over property—Favors
Abstention.
The dissolution order mandated the dissolution of Pure Development and placed control
of its assets in the hands of a receiver. While that order is currently stayed pending appeal, the
State of Indiana appears to have assumed jurisdiction over Pure Development and all related
assets. In opposition to this factor, Plaintiffs argue that Pure Development would retain its
property rights, even if the dissolution order were in effect. [Filing No. 28, at ECF p. 14 (citing
Ind. Code § 23-1-45-5(b)(1)).] While that is true, it is irrelevant to Indiana's apparent assumption
of jurisdiction over the business itself. Accordingly, this factor weighs in favor of abstention.
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2. The inconvenience of the federal forum—Disfavors Abstention.
Defendants concede that the Southern District of Indiana is a convenient forum—
rendering this factor against abstention. [Filing No. 22, at ECF p. 14 n.6.]
3. The desirability of avoiding piecemeal litigation—Favors Abstention.
This factor is concerned with the efficient use of judicial resources and avoiding
contradictory results. Tyrer v. City of South Beloit, Ill., 456 F.3d 744, 755 (7th Cir. 2006). As
discussed above, the ownership of Pure Development is at the heart of both cases, and resolution
of the state dissolution action is likely to resolve or facilitate the resolution of the federal claims.
By resolving or simplifying the issues in the federal action, a stay would avoid wasting judicial
resources. See Clark, 376 F.3d at 687 ("Without staying the federal proceeding, the two actions
would proceed simultaneously—duplicating the amount of judicial resources required to reach a
resolution."). This factor strongly favors abstention.
4. The order in which jurisdiction was obtained by the concurrent
fora—Favors Abstention.
"[T]he focus of this factor is generally which case was filed first and the time between
filings." East Gate-Logistics Park Chicago, LLC v. CenterPoint Properties Trust, No. 24 C
3742, 2024 WL 4265184, at *8 (N.D. Ill. Sept. 23, 2024). The dissolution action was filed a year
before this federal action, and the appeal of the dissolution order was pending before this federal
action began. Therefore, this factor favors abstention.
5. The source of governing law—Neutral as to Abstention.
When a federal action—such as the present case—raises claims under both state and
federal law, the source of the governing law factor "neither favors nor disfavors abstention."
Loughran, 2 F.4th at 650. Staying federal actions based on both state and federal law allows the
state court to resolve key state law claims, such as an underlying ownership dispute, while
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allowing the federal court to adjudicate any remaining federal law claims after the stay is lifted.
GeLab, 99 F.4th at 430-31 (finding that the governing law factor favored abstention when the
federal action raised both state and federal trade secrets claims, and the state action would
resolve the ownership dispute). This factor is neutral as to abstention.5
6. The adequacy of the state-court action to protect the federal plaintiff's
rights—Favors Abstention.
This factor is primarily concerned with the state court's bias, which is generally not an
issue when the parties are all citizens of the state where the concurrent case is pending. GeLab,
99 F.4th at 431. All parties are Indiana citizens [Filing No. 59, at ECF p. 1-2], and therefore, this
factor favors abstention.
7. The relative progress of state and federal proceedings—Favors
Abstention.
The dissolution action has progressed through trial and to appeal, while this federal action
is only at the pleading and preliminary injunction discovery phase. Therefore, this factor
strongly favors abstention.
8. The presence or absence of concurrent jurisdiction—Favors
Abstention.
This factor weighs in favor of abstention when "either court could hear all claims in both
lawsuits." GeLab, 99 F.4th at 431 (citing Clark, 376 F.3d at 688). None of Plaintiffs' claims
raise issues of exclusive jurisdiction of the federal courts.
5 In GeLab, Judge Wood (who also authored Loughran) held that the source of governing law—
both state and federal—favored abstention. However, her analysis on this factor focused
primarily on whether the district court should have stayed the case or dismissed it. Judge Wood
concluded the district court "wisely" opted for a stay rather than dismissal. GeLab, 99 F.4th at
430.
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Moreover, this factor also weighs in favor of abstention when federal claims depend on a
state court's resolution of a key fact. Freed, 756 F.3d at 1023. The trade secrets claims should
not be adjudicated until the state court determines the ownership of Pure Development. This
factor favors abstention.
9. The availability of removal—Favors Abstention.
"The unavailability of removal favors a stay, because the purpose of this factor is to
prevent litigants from circumventing the removal statute." Loughran, 2 F.4th at 650 (italics
original). It is undisputed that the state court cases are not removable. [Filing No. 22, at ECF p.
17; Filing No. 28, at ECF p. 17.] Thus, this factor favors abstention.
10. The vexatious or contrived nature of the federal claim—Disfavors
Abstention.
In support of this factor, the Canopy 5 Defendants argue that Plaintiffs could have
brought the federal claims in the indemnity lawsuit—the state action filed by Seger against Pure
Development's holding company seeking indemnification for Seger's litigation expenses
stemming from earlier lawsuits. [Filing No. 22, at ECF p. 20; Filing No. 22-4.] However, Seger
filed the indemnity lawsuit on June 30, 2025—the same day that Plaintiffs filed this action in
federal court. [Filing No. 22-4.] Thus, the decision to file the federal action was likely made
before Plaintiffs had notice of the indemnity action. There is insufficient evidence of any
improper motive in bringing the federal claims. This factor weighs against abstention.
As the foregoing demonstrates, most factors favor abstention—many strongly so. The
factors weigh more heavily in favor of a stay. These exceptional circumstances warrant
Colorado River abstention.
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III. Conclusion
For these reasons, the Canopy 5 Defendants' motion to stay [Filing No. 22] is granted.
The case is stayed pending the state court's resolution of the dissolution action, currently on
appeal.
Distribution:
All ECF-registered counsel of record via email
Date: 11/6/2025
_______________________________
Tim A. Baker
United States Magistrate Judge
Southern District of Indiana
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