Citations
- 56 F. Supp. 3d 1121
Full opinion text
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS AND GRANTING DEFENDANTS’ MOTION TO STAY
MARGARET M. MORROW, District Judge.
On May 22, 2014, ScripsAmerica, Inc. (“Scrips”) filed this action against Iron-ridge Global LLC d/b/a Ironridge Global IV, Ltd., John Kirkland, and Brendan O’Neil (collectively “Ironridge”), as well as certain fictitious defendants. The complaint alleges claims for securities fraud, breach of contract, tortious bad faith, and declaratory relief. The claims arise from an allegedly fraudulent scheme to manipulate Scrips’ stock price in order to obtain additional shares of the stock under an agreement between the parties pursuant to which Ironridge would pay off certain of Scrips’ accounts payable in exchange for issuance of stock set by an agreed upon formula.
On June 25, 2014, defendants filed a motion to dismiss, or alternatively to stay. Scrips opposes the motion.
I. FACTUAL BACKGROUND
This action arises out of an allegedly fraudulent scheme devised by -‘Ironridge. Scrips is a pharmaceuticals distributor whose stock is publicly traded on the over-the-counter (“OTC”) market. Ironridge’s purported scheme involved the issuance of Scrips’ common stock to Ironridge in exchange for an undertaking by Ironridge to pay Scrips’ outstanding accounts payable. Scrips alleges that the transaction was first proposed during a telephone call it received from John Kirkland and Brendan O’Neil — directors of Ironridge — on August 28, 2013. It contends that Kirkland and O’Neil told Scrips’ chief executive officer, Robert Schneiderman, that Ironridge could pay Scrips’ accounts payable, which totaled approximately $700,000, in exchange for an amount of Scrips stock to be determined by contractual formula. Kirkland and O’Neil explained that to effect the exchange, Scrips did not need to register the shares before transferring them to Ir-onridge. The parties discussed the transaction further on September 4 and October 2, 2013.
During the calls, Ironridge requested that the contract memorializing the transaction include a provision for an adjustment to protect it in the event of a decline in Scrips’ stock price. Scrips allegedly agreed to the inclusion of such a provision, pursuant to which Ironridge was to receive more stock than the originally agreed amount if Scrips’ stock price declined following consummation of the transaction. The adjustment mechanism was outlined, together with certain other terms, in a term sheet Ironridge prepared and gave to Scrips. Scrips contends that Ironridge, Kirkland, and O’Neil did not disclose their intention to manipulate the market for Scrips shares in order to reduce the share price and increase the number of shares Ironridge was entitled to receive under the agreement.
On October 4, 2013, Schneiderman, Kirkland, and O’Neil purportedly discussed the potential effect Ironridge’s sale of the stock it received might have on Scrips’ share price. Unlike other entities that had funded Scrips in exchange for stock, Ironridge allegedly represented that it would not act to manipulate or otherwise affect Scrips’ stock price. Specifically, Ironridge purportedly said that its sales of Scrips shares would “never be more than ten percent of the volume of sales on any given day.” Scrips contends that Iron-ridge’s representations were knowingly and wilfully false.
Because the shares were unregistered, Ironridge and Scrips had to obtain court approval under California and federal securities laws before a transfer of the stock could take place. Thus, on October 11, 2013, Ironridge filed a breach of contract complaint in Los Angeles Superior Court that sought to collect the accounts payable debts; it sued as the successor in interest to Scrips’ creditors under receivables purchase agreements into which it had entered with the creditors. Ironridge and Scrips then submitted a stipulation to the court that was the means by which the exchange transaction was to be effected. The stipulation provided that Scrips would transfer 8,690,000 shares of stock to Iron-ridge in satisfaction of $686,962.08 in debt owned by Ironridge. The shares were to be “unrestricted and freely tradeable exempted shares” of Scrips common stock. The stipulation stated the shares had to be capable of being “immediately resold ... without restriction,” and noted that Iron-ridge could “sell any of its shares of [Scrips] common stock issued pursuant to the [stipulation] at any time.” The stipulation warned that issuance of the shares could “have a dilutive effect [on Scrips’ stock], which [might] be substantial.”
The stipulation also memorialized the adjustment mechanism the parties had previously discussed. First, Scrips would immediately issue and deliver to Ironridge 8,690,000 shares of its common stock; the issuance, however, was subject to certain “adjustments, issuances, returns, and ownership limitations.” Future adjustments were to be made based on trading activity in Scrips stock during the “calculation period.” The “final amount” of shares to which Ironridge was entitled was to be calculated by taking (a) the sum of the claim amount [i.e., $686,962.08], 10 % of third party agent fees, and Ironridge’s reasonable attorneys’ fees and expenses, and dividing it by (b) 80 % of the following: the closing price of Scrips common stock on the trading day immediately preceding the date the state court entered an order on the stipulation; the resulting number was not to exceed the arithmetic average of the individual volume weighted average price of any five trading days during the calculation period, less $.01 per share (based on data reported by Bloomberg LP).
The stipulation also provided that if at any point during the calculation period the shares issued to Ironridge dropped below “any reasonably possible [fjinal [ajmount” or if Scrips shares closed below 80 % of the closing price on the trading day prior to entry of an order on the stipulation, Ironridge was entitled to request the issuance of additional shares. At the conclusion of the calculation period, if the total value of the initial issuance and subsequent issuances was less than the final amount, Scrips was required to issue further shares so that the total number of shares issued equaled the final amount; conversely, if the number of shares issued to Ironridge exceeded the final amount, Ironridge was required to return the excess shares to Scrips. The stipulation stated, however, that Scrips was not required to issue at any one time a number of shares that, aggregated with all'other shares beneficially owned or controlled by Ironridge or its affiliates, exceeded 9.99 % of the total number "of shares of common stock outstanding. Despite the fact that Kirkland, O’Neil, and Schneiderman allegedly discussed the issue, there is no provision in the stipulation requiring that Ironridge’s sales of Scrips shares not exceed 10% of the daily trading volume on any given day.
On November 8, 2013, the parties filed a joint ex parte application in state court for an order approving the stipulation; they argued that ex parte relief was necessary because the stipulation addressed the issuance of “shares of [Scrips] stock with a substantially fluctuating market price.” The application recited that over the course of the previous year, the price of Scrips common stock had fluctuated between $1.05 and $.08, and that it would be difficult to reach any negotiated resolution that did not require ex parte relief, as the agreement could collapse if Scrips’ stock price fluctuated too much. As support for their request that the court approve the stipulation, both parties filed declarations stating that they believed the terms of agreement were fair. The stipulation recited that the agreement was fair to Ironridge and that Scrips’ board had resolved that the terms were fair to and in the best interests of its shareholders.
On November 8, 2013, Superior Court Judge Rolf M. Treu entered an order on the parties’ stipulation. Scrips alleges that thereafter, on several trading days, Ironridge sold an amount of Scrips stock that exceeded ten percent of all sales on that day. Specifically, it contends that Ironridge’s sales during the week of January 6, 2014 represented 28.4 % of total sales; sales during the week of January 21, 2014 represented 22.6%; and weekly sales throughout February 2014 ranged from 30-50%. Scrips maintains that Ir-onridge made these sales with the intent and purpose of manipulating the market to reduce the price of Scrips’ stock so that the number of shares to which it was entitled under the parties’ agreement would increase. Scrips contends that the sales in fact reduced its stock price. It asserts that during the period of alleged manipulation, Ironridge refused to provide any information concerning its trading activity, claiming it was confidential.
Based on the decline in Scrips’ share price, Ironridge filed an ex parte application for an order compelling the issuance of additional shares pursuant to the May 6, 2014 stipulation. Scrips opposed the application. It argued that the court should deny it because Ironridge had engaged in “wrongful conduct” in “bad faith” and had “unclean hands.” Specifically, it asserted that Ironridge had fraudulently manipulated the market for Scrips stock, i.e., engaged in “open market manipulation,” by “short selling” Scrips’ shares during the calculation period in an effort to drive the share price down artificially and require Scrips to issue more shares to Ironridge pursuant to the terms of the parties’ agreement. Scrips also contended that Ironridge’s conduct was a breach of the parties’ agreement, as well as a breach of the covenant of good faith and fair dealing implied therein. Finally, it asserted that additional issuance of shares “could be in violation of [federal] securities laws.”
On May 6, 2014, Judge Treu implicitly rejected each of Scrips’ arguments. He entered an order enforcing the order that had approved the stipulation (“enforcement order”), and directing that Scrips issue an additional 1,646,008 shares of common stock to Ironridge pursuant to the adjustment mechanism set forth in the stipulation. Scrips appealed the order on May 14, 2014. That appeal is presently pending before the California Court of Appeal, with Scrips’ opening brief due October 15, 2014.
On May 22, 2014, eight days after appealing the enforcement order, Scrips filed this action, alleging claims for breach of contract, tortious bad faith, violation of Rule 10b-5, and declaratory relief. Scrips seeks a declaration that it need not issue the additional 1,646,008 shares that the Superior Court has ordered it to issue. Scrips maintains that Ironridge intentionally engaged in post-stipulation trading activity to manipulate the market and reduce the price of Scrips’ stock in order to increase the number of shares it was to receive pursuant to the stipulation’s calculation formula. Scrips asserts that Iron-ridge manipulated its stock to send false information regarding the supply of and demand for Scrips’ stock to the market, inducing others to sell Scrips stock and creating further market distortion. Scrips contends that absent illegal manipulation by Ironridge, its stock would be trading at $0.15 per share instead of the current price of approximately $0.10. It asserts that Ironridge’s manipulative actions have caused it to issue 10.3 million shares, instead of the 8.7 million initially required by the agreement, and that Iron-ridge is seeking issuance of a further 1.6 million shares through the California courts. As a result, Scrips contends, it has been injured by issuing stock worth more than $1.4 million to Ironridge, in satisfaction of a less than $770,000 debt.
II. DISCUSSION
A. Ironridge’s Request for Judicial Notice
Ironridge asks that the court take judicial notice of various documents related to the state court action. Because Rule 12(b)(6) review is confined to the complaint, the court typically does not consider material outside the pleadings (e.g., facts presented in briefs, affidavits, or discovery materials) in deciding such a motion. In re American Continental Corp./Lincoln Sav. & Loan Securities Litig., 102 F.3d 1524, 1537 (9th Cir.1996). It may, however, properly consider exhibits attached to the complaint and documents whose contents are alleged in the complaint but not attached, if their authenticity is not questioned. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir.2001).
In addition, the court can consider matters that are proper subjects of judicial notice under Rule 201 of the Federal Rules of Evidence. Id. at 688-89; Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994), overruled on other grounds by Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir.2002); Hal Roach Studios, Inc. v. Richard Feiner and Co., Inc., 896 F.2d 1542, 1555 n. 19 (9th Cir.1990); see also Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) (“[Cjourts must consider the complaint in its entirety, as well as other sources courts ordinarily examine when ruling on Rule 12(b)(6) mo tions to dismiss, in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice”). The court is “not required to accept as true conclusory allegations which are contradicted by documents referred to in the complaint.” Steckman v. Hart Brewing Inc., 143 F.3d 1293, 1295 (9th Cir.1998).
Ironridge asks that the court take judicial notice of nine documents filed in the state court action. These documents bear directly on whether the court can properly exercise jurisdiction over this case. It is well established that federal courts may take judicial notice of related state court orders and proceedings. See Dawson v. Mahoney, 451 F.3d 550, 551 (9th Cir.2006) (taking judicial notice of state court orders and proceedings); see also United States v. Black, 482 F.3d 1035, 1041 (9th Cir.2007) (stating that an appellate court “may take notice of proceedings in other courts, both within and without the federal judicial system, if those proceedings have a direct relation to matters at issue”); Farahani v. Floria, No. 12-CV-04637-LHK, 2013 WL 1703384, *1 n. 1 (N.D.Cal. Apr. 19, 2013) (“The remaining documents submitted for judicial notice are all documents filed in previous and concurrent lawsuits, which are Similarly suitable for judicial notice under Fed. R.Evid. 201(b)”).
The parties’ state court stipulation, moreover, which is Exhibit B to Iron-ridge’s request for judicial notice, is attached to the complaint and therefore need not be judicially noticed to be considered in deciding the motion. See Lee, 250 F.3d at 688 (“a court may consider ‘material which is properly submitted as part, of the complaint’ on a motion to dismiss without converting the motion to dismiss into a motion for summary judgment,” quoting Branch, 14 F.3d at 453). Finally, as Iron-ridge notes, the state court order approving the parties’ stipulation, which is Exhibit F to Ironridge’s request for judicial notice, is referenced in the complaint, and can be considered under the incorporation by reference doctrine. See United States v. Ritchie, 342 F.3d 903, 908 (9th Cir.2003) (acknowledging that a district court may assume that the contents of a document incorporated by reference “are true for purposes of a motion to dismiss”); In re Downey Sec. Litig., No. CV 08-3261-JFW, 2009 WL 2767670, *6 n. 4 (C.D.Cal. Aug. 21, 2009) (same).
B. Legal Standard Governing Motions to Dismiss under Rule 12(b)(6)
A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in the complaint. A Rule 12(b)(6) dismissal is proper only where there is either a “lack of a cognizable legal theory,” or “the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir.1988). The court must accept all factual allegations pleaded in the complaint as true, and construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996); Mier v. Owens, 57 F.3d 747, 750 (9th Cir.1995).
The court need not, however, accept as true unreasonable inferences or conclusory legal allegations cast in the form of factual allegations. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (“While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiffs obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do”). Thus, a complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ... A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); see also Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (“Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)” (citations omitted)); Moss v. United States Secret Service, 572 F.3d 962, 969 (9th Cir.2009) (“[F]or a complaint to survive a motion to dismiss, the non-conclusory ‘factual content,’ and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief,” citing Iqbal and Twombly).
C. Whether the Court Should Dismiss Scrips’ Claims Based on the Rooker-Feldman Doctrine
1. Legal Standard Governing Application of the Rooker-Feldman Doctrine
Under the Rooker-Feldman doctrine, which takes its name from the Supreme Court’s decisions in Rooker v. Fidelity Trust Co., 263 U.S. 413, 416, 44 S.Ct. 149, 68 L.Ed. 362 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 476, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983), a federal district court does not have subject matter jurisdiction to hear a direct appeal from a final judgment of. a state court. See Noel v. Hall, 341 F.3d 1148, 1155 (9th Cir.2003). A losing party in state court is thus barred from seeking what in substance would be appellate review of a state judgment in federal district court, even if the party contends the state judgment violated.his or her federal rights. Johnson v. DeGrandy, 512 U.S. 997, 1005-06, 114 S.Ct. 2647, 129 L.Ed.2d 775 (1994); Allah v. Superior Court, 871 F.2d 887, 891 (9th Cir.1989) (stating that Rooker-Feldman doctrine “applies even though the direct challenge is anchored to alleged deprivations of federally protected due process and equal protection rights”), superseded by statute on other grounds as stated in Schroeder v. McDonald, 55 F.3d 454, 458 (9th Cir.1995); Worldwide Church of God v. McNair, 805 F.2d 888, 891 (9th Cir.1986) (“This doctrine applies even when the challenge to the state court decision involves federal constitutional issues”).
The rationale behind the Rooker-Feldman doctrine is threefold. First, the only federal court with the power to hear appeals from state courts is the United States Supreme Court. Bennett v. Yoshina, 140 F.3d 1218, 1223 (9th Cir.1998). Second, state courts are as competent as federal courts to decide federal constitutional issues. Worldwide Church of God, 805 F.2d at 891. Third, “any other rule would result in a waste of judicial resources and unnecessary friction between state and federal courts.” Id.
“When there is parallel state and federal litigation, Rooker-Feldman is not triggered simply by the entry of judgment in state court. Th[e] [Supreme] Court has repeatedly held that ‘the pendency of an action in the state court is no bar to proceedings concerning the same matter in the [fjederal court having jurisdiction.’ ” Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 292, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005). “Proceedings end for Rooker-Feldman purposes when the state courts finally resolve the issue that the federal court plaintiff seeks to reliti-gate in a federal forum, even if other issues remain pending at the state level.” Mothershed v. Justices of Supreme Court, 410 F.3d 602 (9th Cir.2005) (emphasis added). Thus, where a federal action is filed “while the state court action eontinue[s] in the appeals process in state court, the state proceedings ha[ve] not ended.” Nicholson v. Shafe, 558 F.3d 1266, 1278 (11th Cir.2009); Guttman v. Khalsa, 446 F.3d 1027, 1032 (10th Cir.2006) (“In this case, Guttman filed his federal suit while his petition for certiorari to the New Mexico Supreme Court was pending. His state suit was not final. As such, the Rooker-Feldman doctrine does not bar his federal suit and the district court does have subject matter jurisdiction to hear the case”); Federacion de Maestros de Puerto Rico v. Junta de Relaciones del Trabajo de Puerto Rico, 410 F.3d 17, 24 (1st Cir.2005) (“Exxon Mobil tells us when a state court judgment is sufficiently final for operation of the Rooker-Feldman doctrine: when ‘the state proceedings [have] ended.’ If federal litigation is initiated before state proceedings have ended, then—even if the federal plaintiff expects to lose in state court and hopes to win in federal court—the litigation is parallel, and the Rooker-Feldman doctrine does not deprive the court of jurisdiction”).
The Rooker-Feldman doctrine precludes the exercise of jurisdiction not only over claims that are de facto appeals of a state court decision but also over suits that raise issues that are “inextricably intertwined” with an issue resolved by the state court. See Feldman, 460 U.S. at 483 n. 16, 103 S.Ct. 1303; Noel, 341 F.3d at 1158. As the Ninth Circuit has explained: “If claims raised in the federal court action are ‘inextricably intertwined’ with the state court’s decision such that the adjudication of the federal claims would undercut the state ruling or require the district court to interpret the application of state laws or procedural rules, then the federal complaint must be dismissed for lack of subject matter jurisdiction.” Bianchi v. Rylaarsdam, 334 F.3d 895, 898 (9th Cir.2003).
In determining whether a plaintiffs federal claims are “inextricably intertwined” with a state court decision, a court cannot simply “‘compare the issues involved in the state-court proceeding to those raised in the federal-court plaintiff.’ ” Id. at 900 (quoting Kenmen Engineering v. City of Union, 314 F.3d 468, 476 (10th Cir.2002)). Rather, it must “ ‘pay close attention to the relief sought by the federal-court plaintiff.’ ” Id. As the Ninth Circuit explained in Worldwide Church of God,
“claims are inextricably intertwined if the district court must scrutinize not only the challenged rule itself, but the state court’s application of the rule. If, in order to resolve the claim, the district court would have to go beyond mere review of the state rule as promulgated, to an examination of the rule as applied by the state court to the particular factual circumstances of the plaintiffs case, then the court lacks jurisdiction.” Worldwide Church of God, 805 F.2d at 892 (quotations and internal alterations omitted).
2. Application of Rooker-Feldman to the Facts of This Case
Ironridge argues that Scrips’ complaint should be dismissed for lack of subject matter jurisdiction because it is a de facto appeal from a final state court judgment and is thus barred by the Rooker-Feldman doctrine. Specifically, Iron-ridge contends that Scrips’ complaint is a de facto appeal of the state court order approving the parties’ stipulation because it seeks to invalidate the stipulation on the basis that it was procured by fraud. It asserts that the state court judgment is final because the stipulation was unappealable by its terms, and because Scrips failed to file a notice of appeal within 60 sixty days of the entry of an order on the stipulation, as required by California law. See Cal. Rules Of Court 8.104 (time for •appeal is sixty days after notice or 180 days after the entry of judgment).
While the complaint contains allegations that Ironridge executed a scheme to defraud that induced Scrips to enter into the agreement and stipulation, these allegations appear to form the basis for its Rule 10b-5 claim, as opposed to its breach of contract and breach of the implied covenant/tortious bad faith claims. The Rule 10b-5 claim does not seek to invalidate the parties’ agreement or the state court order approving the stipulation that embodied it. Rather, it seeks damages for securities fraud. This is an “independent” claim that is not barred by Rooker-Feldman. See Exxon Mobil, 544 U.S. at 293, 125 S.Ct. 1517 (“If a federal plaintiff ‘presents] some independent claim, albeit one that denies a legal conclusion that a state court has reached in a case to which he was a party ..., then there is jurisdiction and state law determines whether the defendant prevails under principles of preclusion,”’ quoting GASH Assocs. v. Rosemont, 995 F.2d 726, 728 (7th Cir.1993), and citing Noel, 341 F.3d at 1163-64); Great Western Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159, 173 (3d Cir.2010) (holding, in a case where plaintiff alleged that adverse judgments entered against it in state court were the result of a conspiracy between defendants and the Pennsylvania judiciary, that Rooker-Feld-man did not bar the claim because “while Great Western’s claim for damages may require review of state-court judgments and even a conclusion that they were erroneous, those judgments would not have to be rejected or overruled for Great Western to prevail”).
Similarly, Scrips’ breach of contract and breach of the implied covenants claims do not seek to invalidate the parties’ agreement, or the stipulated order the state court entered approving the stipulation that embodied it. Rather, they seek damages based on Ironridge’s purported breach of the express or implied terms of the agreement and stipulation. Consequently, these claims likewise are not barred by Rooker-Feldman.
Scrips’ declaratory relief claim, however, is of a different character. That claim requests that the court declare that Scrips “has no obligation to meet [Iron-ridge’s] demands [for additional stock] be cause Scrips is excused from performing under the terms of the Stipulation due to Ironridge’s illegal conduct, breach of the Stipulation, and tortious bad faith.” The claim asserts that Ironridge continues to demand the issuance of additional shares in addition to those that the state court directed be issued in its enforcement order, now on appeal, and requests that the court declare that Scrips has no obligation to comply with the stipulated judgment to the extent it compels Scrips to accede to these demands. This is equivalent to a request that the court declare the state court order approving the stipulation, and making it an enforceable judgment, void. This is precisely the type of claim that is barred by Rooker-Feldman. In this regard, courts distinguish between federal court plaintiffs who seek damages for fraud that led to the entry of a state court judgment, and those that seek to invalidate the state court judgment itself because it was procured by fraud. Compare Illinois Central Railroad Co. v. Guy, 682 F.3d 381, 391 (5th Cir.2012) (Rooker-Feldman does not bar a claim that state court plaintiffs’ lawyers obtained a settlement judgment through fraudulent misrepresentations); Great Western Mining & Mineral Co., 615 F.3d at 173 (Rooker-Feldman does not bar a federal plaintiffs damages claims based on allegations that defendants conspired to engineer its loss in state court by exercising improper influence over state judges); McCormick v. Braverman, 451 F.3d 382, 392-93 (6th Cir.2006) (Rooker-Feldman did not deprive the district court of jurisdiction to hear federal plaintiff’s claims against a state court receiver and homeowners’ insurer alleging fraud in obtaining a receivership order from state court) with Morris v. American Home Mortg. Servicing, Inc., 443 Fed.Appx. 22, 24 (5th Cir. 2011) (Unpub.Disp.) (holding that an otherwise independent unlawful debt collection practices claim related to a foreclosure judgment was barred because the only relief sought “was the setting aside of the state foreclosure judgment and staying of the execution of the writ of possession”); Turner v. Cade, 354 Fed.Appx. 108, 110-11 (5th Cir.2009) (Unpub.Disp.) (holding that Rooker-Feldman barred a claim that a state court divorce decree was procured through fraud when the federal plaintiff asked the decree be declared void); Ford v. U.S. Dep’t of Treasury Internal Revenue Serv., 50 Fed.Appx. 490, 491 (2d Cir. 2002) (Unpub.Disp.) (plaintiff’s claim seeking invalidation of a state court foreclosure judgment on the ground that it was procured through fraud was barred by Rook-er-Feldman ).
Scrips disputes this, arguing that it does not seek to have the court review the state court stipulated judgment, but rather Ironridge’s “post-settlement abuse of [that] judgment.” It contends that, to the extent its complaint challenges any ruling of the state court, it is the order enforcing the stipulated judgment and requiring the issuance of additional shares. Scrips asserts that decision is not “final” for purposes of Rooker-Feldman because' it is presently on appeal. See Mothershed, 410 F.3d at 605 n. 1 (“Proceedings end for Rooker-Feldman purposes when the state courts finally resolve the issue that the federal court plaintiff seeks to relitigate in a federal forum, even if other issues remain pending at the state level”); see also Nicholson, 558 F.3d at 1278 (“because the Appellants filed the instant federal action while the state court action continued in the appeals process in state court, the state proceedings had not ended”); Guttman, 446 F.3d at 1032 (“In this case, Guttman filed his federal suit while his petition for certiorari to the New Mexico Supreme Court was pending. His state suit was not final. As such, the Rooker-Feldman doctrine does not bar his federal suit and the district court does have subject matter jurisdiction to hear the case”). * The court would agree that, to the extent the declaratory relief claim seeks a declaration that it has no obligation to issue an additional 1.6 million shares to Ironridge, it attacks a judgment that is not yet final, and is not barred by the Rooker-Feldman doctrine for the reasons enunciated in Exxon Mobil. Exxon Mobil, 544 U.S. at 292, 125 S.Ct. 1517. As noted, however, the claim appears to rest on demands for additional shares beyond the 1.6 million, and to request that Scrips need not comply with the terms of the stipulated judgment at any point in the future. This is a broader attack on the validity of that judgment, which is final, and falls within the scope of the Rooker-Feldman bar.
For the reasons stated, the court denies Ironridge’s motion to dismiss Scrips’ Rule 10b-5, breach of contract, and breach of the covenant/tortious bad faith claims un-* der the Rooker-Feldman doctrine. It also denies Ironridge’s request to dismiss Scrips’ declaratory relief claim to the extent it seeks a declaration that it is not obligated to issue 1.6 million additional shares of stock to Ironridge as directed by the state court’s enforcement order currently on appeal. It grants Ironridge’s motion to the extent Scrips seeks a declaration that it be excused altogether from performing under the terms of the stipulated judgment.
D. Whether the Court Should Abstain from Deciding Scrips’ Claims under Younger v. Harris 1. Legal Standard Governing Abstention under Younger
Under the doctrine first articulated in Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), federal courts must abstain from hearing cases that would interfere with pending state court proceedings that implicate important state interests. Potrero Hills Landfill, Inc. v. County of Solano, 657 F.3d 876, 881 (9th Cir.2011) (citing Middlesex County Ethics Comm. v. Garden State Bar Ass’n, 457 U.S. 423, 432, 102 S.Ct. 2515, 73 L.Ed.2d 116 (1982)). The doctrine is justified by considerations of comity; “a proper respect for state functions, a recognition of the fact that the entire country is made up of a Union of separate state governments, and a continuance of the belief that the National Government will fare best if the States and their institutions are left free to perform their separate functions in their separate ways.” Younger, 401 U.S. at 44, 91 S.Ct. 746.
“Absent ‘extraordinary circumstances,’ abstention in favor of state judicial proceedings is required if the state proceedings (1) are ongoing, (2) implicate important state interests, and (3) provide the plaintiff an adequate opportunity to litigate federal claims.” Hirsh v. Justices of Supreme Court of California, 67 F.3d 708, 712 (9th Cir.1995) (citing Middlesex County Ethics Committee, 457 U.S. at 437, 102 S.Ct. 2515). Even then, abstention is appropriate only where the federal action enjoins the state court proceedings or has the practical effect of doing so. AmerisourceBergen Corp. v. Roden, 495 F.3d 1143, 1149 (9th Cir.2007); Gilbertson v. Albright, 381 F.3d 965, 978 (9th Cir.2004) (en banc) (“If a state-initiated proceeding is ongoing, and if it implicates important state interests ..., and if the federal litigant is not barred from litigating federal constitutional issues in that proceeding, then a federal court action that would enjoin the proceeding, or have the practical effect of doing so, would interfere in a way that Younger disapproves” (emphasis original)).
While the Supreme Court has never directly addressed the subject, the Ninth Circuit has held “that Younger principles apply to actions at law as well as for injunctive or declaratory relief.” Gilbertson, 381 F.3d at 968 (reasoning that “a determination that the federal plaintiffs constitutional rights have been violated would have the same practical effect as a declaration or injunction on pending state proceedings”). If, in a case in which the plaintiff seeks damages, the court determines that the Younger abstention is appropriate, it should stay the matter until the state court proceedings are concluded, rather than dismissing the action. Id. at 981-82.
2. Application of Younger to the Facts of this Case
Ironridge argues that the court should dismiss Scrips’ complaint under Younger because this action is “a blatant attempt to interfere with the enforcement of the stipulated judgment.” It contends that enforcement proceedings are ongoing because they are currently on appeal in state court. Scrips concedes that the enforcement order is on appeal to the California Court of Appeal. “For Younger purposes, the State’s trial-and-appeals process is treated as a unitary system, and for a federal court to disrupt its integrity by intervening in mid-process would demonstrate a lack of respect for the State as sovereign.” New Orleans Pub. Serv., Inc. v. Council of City of New Orleans, 491 U.S. 350, 369, 109 S.Ct. 2506, 105 L.Ed.2d 298 (1989). Thus, “ ‘[a] necessary concomitant of Younger is that a party [wishing to contest in federal court the judgment of a state judicial tribunal] must exhaust his state appellate remedies before seeking relief in the District Court.’ ” Id. (quoting Huffman v. Pursue, Ltd., 420 U.S. 592, 608, 95 S.Ct. 1200, 43 L.Ed.2d 482 (1975)). For that reason, the first threshold requirement to Younger abstention—an ongoing state court proceeding—is satisfied.
Ironridge argues that the second threshold requirement is met as well, because the state court enforcement proceeding implicates an important state interest, i.e., the state’s “interest in enforcing the orders and judgments of its courts.” See Sprint Communications, Inc. v. Jacobs, — U.S. -, 134 S.Ct. 584, 588, 187 L.Ed.2d 505 (2013) (citing Pennzoil Co. v. Texaco Inc., 481 U.S. 1, 107 S.Ct. 1519, 95 L.Ed.2d 1 (1987)). Scrips counters that this action does not involve the type of matters that have traditionally been regarded as vital state interests. It asserts that, because the stipulated judgment case was the product of an agreement between the parties, there was no substantial “process” in the state court, and hence any de minimis state interest is outweighed by the federal interest in enforcing securities laws. The Supreme Court has “repeatedly recognized that the States have important interests in administering certain aspects of their judicial system.” Pennzoil Co., 481 U.S. at 12-13, 107 S.Ct. 1519; ReadyLink Healthcare, Inc. v. State Comp. Ins. Fund, 754 F.3d 754, 759 (9th Cir.2014) (Younger applies when state court proceedings “involve a state’s interest in enforcing the orders and judgments of its courts”); Root v. Schenk, 953 F.Supp. 1115, 1121 (C.D.Cal. 1997) (same).
As the Ninth Circuit has cautioned, however, “[t]aken out of context, these statements suggest that California’s interest in enforcing the judgment in this particular case is of sufficient importance to meet Younger’s second threshold element.” See AmerisourceBergen, 495 F.3d at 1150 (emphasis original). That court has “made it clear that ‘[t]he importance of the [state’s] interest is measured by considering its significance broadly, rather than by focusing on the state’s interest in the resolution of an individual case.’ ” Id. (quoting Baffert v. Cal. Horse Racing Bd., 332 F.3d 613, 618 (9th Cir.2003)); see also Champion Int’l Corp. v. Brown, 731 F.2d 1406, 1408 (9th Cir.1984) (“[A] challengef] [to] only one ... order, not the whole procedure” is “not a substantial enough interference with [a state’s] administrative and judicial processes to justify abstention”). “Accordingly, binding [Ninth Circuit] precedent prevents the court from finding that California’s interest in enforcing this one particular judgment — as. opposed to a state’s wholesale interest in preserving its procedure for posting an appeal bond [see Pennzoil Co., 481 U.S. at 12-14, 107 S.Ct. 1519], or its interest in retaining á particular contempt of court scheme [see Juidice v. Vail, 430 U.S. 327, 330, 335, 97 S.Ct. 1211, 51 L.Ed.2d 376 (1977) ], — qualifies as sufficiently ‘important’ to satisfy Younger’s second threshold element.” Id. For this reason, the court cannot dismiss Scrips’ complaint based on Younger abstention.
E. Whether the Court Should Stay Scrips’ Claims under Colorado River Water Conservation District v. United States
1. The Colorado River Doctrine
Ironridge next asserts that the action should be dismissed or stayed under Colorado River Water Conservation District v. United States, 424 U.S. 800, 817, 96 S.Ct. 1286, 47 L.Ed.2d 488 (1976), which applies “in situations involving the contemporaneous exercise of concurrent jurisdictions [.]” “In Colorado River, the Supreme Court was concerned with the problem posed by the contemporaneous exercise of concurrent jurisdiction by state and federal courts.” Smith v. Central Ariz. Water Conservation Dist., 418 F.3d 1028, 1032-33 (9th Cir.2005) (citing Gilbertson, 381 F.3d at 982 n. 17). “In such cases, the Court recognized there may be circumstances in which traditional abstention principles do not apply, yet considerations of wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation, nonetheless justify a decision to stay or dismiss federal proceedings pending resolution of concurrent state court proceedings.” Smith, 418 F.3d at 1033 (internal quotation marks and citations omitted). “Such circumstances are, however, exceedingly rare. As [the Ninth Circuit] previously observed, the Colorado River doctrine is a narrow exception to the virtually unflagging obligation of the federal courts to exercise the jurisdiction given them.” Id.
“To decide whether a particular case presents the exceptional circumstances that warrant a Colorado River stay or dismissal, the district court must carefully consider ‘both the obligation to exercise jurisdiction and the combination of factors counseling against that exercise.’ ” R.R. Street & Co. Inc. v. Transport Ins. Co., 656 F.3d 966, 978 (9th Cir. 2011) (quoting Colorado River, 424 U.S. at 818, 96 S.Ct. 1236). The Ninth Circuit has identified eight factors useful in assessing the propriety of a stay or dismissal under Colorado River. These are: “(1) which court first assumed jurisdiction over any property at stake; (2) the inconvenience of the federal forum; (3) the desire to avoid piecemeal litigation; (4) the order in which the forums obtained jurisdiction; (5) whether federal law or state law provides the rule of decision on the merits; (6) whether the state court proceedings can adequately protect the rights of the federal litigants; (7) the desire to avoid forum shopping; and (8) whether the state court proceedings will resolve all issues before the federal court.” Id. at 978-79. “The factors relevant to a given case are subjected to a flexible balancing test, in which one factor may be accorded substantially more weight than another depending on the circumstances of the case, and ‘with the balance heavily weighted in favor of the exercise of jurisdiction.’” Holder v. Holder, 305 F.3d 854, 870-71 (9th Cir. 2002) (quoting Moses H Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 16, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)).
As an initial matter, Ironridge seeks a Colorado River stay only as to Scrips’ breach of contract, breach of implied covenant/tortious bad faith, and declaratory relief claims. It acknowledges that the state court has no concurrent jurisdiction to hear Scrips’ Rule 10b-5 claim, and thus does not seek to have the court should stay that claim. See Intel Corp. v. Advanced Micro Devices, Inc., 12 F.3d 908, 913 n. 7 (9th Cir.1993) (“the circuit courts, and the Ninth Circuit in particular, have uniformly held that a district court may not grant a stay in [cases involving claims subject to exclusive federal jurisdiction]”); Minucci v. Agrama, 868 F.2d 1113, 1115 (9th Cir. 1989) (“the Colorado River doctrine only applies to claims under the concurrent jurisdiction of the federal and state courts”); Silberkleit v. Kantrowitz, 713 F.2d 433, 436 (9th Cir.1983) (“the district court has no discretion to stay proceedings as to claims within exclusive federal jurisdiction under the wise judicial administration exception”); Krieger v. Atheros Communications, Inc., 776 F.Supp.2d 1053, 1058 (N.D.Cal.2011) (holding Colorado River did not apply to claims under the Securities Exchange Act because such claims fall within the exclusive jurisdiction of federal courts).
The Ninth Circuit has not addressed the propriety of issuing a partial Colorado River stay. District courts in the Ninth Circuit have repeatedly found partial stays permissible, however, “where some, but not all, of a federal plaintiffs claims are pending in a parallel state action.” Krieger, 776 F.Supp.2d at 1060-61 (staying plaintiffs state law class action claims while permitting federal securities law claims to proceed); see also Taylor v. AlliedBarton Sec. Servs. LP, No. 13-CV-01613-AWI, 2014 WL 1329415, *5 n. 6 (E.D.Cal. Apr. 1, 2014) (observing that “[c]ourts in the Ninth Circuit have [ ] held that a partial stay of proceedings is authorized under the Colorado River doctrine,” and staying state law claims while permitting a Fair Labor Standards Act claim to proceed); Sperber-Porter v. Kell, No. CV-08-01424-PHX-GMS, 2009 WL 1600689, *5 (D.Ariz. June 8, 2009) (“Finally, Plaintiffs do not disagree that the Court’s stay of the declaratory judgment claim was proper. Plaintiffs confíne their motion to- arguing that the Court should not have stayed the breach of contract claim, and Plaintiffs have never disputed that their declaratory judgment claim regarding the meaning of paragraph fifteen of the settlement agreement is identical to the issue before (and now decided by) the state court. Thus, there is no dispute that at least a partial stay was proper”); In re Countrywide Fin. Corp. Derivative Litig., 542 F.Supp.2d 1160, 1172 (C.D.Cal.2008) (concluding that a partial stay of state law claims raised in both state and federal proceedings are under Colorado River was permissible, and permitting a federal securities law claim to go forward); Daugherty v. Oppenheimer & Co., No. CV 06-7725 PJH, 2007 WL 1994187, *6 (N.D.Cal. July 5, 2007) (“In addition, contrary to the argument advanced by plaintiff, the court finds that Colorado River applies even where a state court action will not resolve all the claims in the federal action. Neither Holder nor Intel supports plaintiffs argument that the Colorado River doctrine may not be used to dismiss or stay only part of an action. Holder and Intel simply stand for the proposition that a Colorado River motion may not be granted where a defendant seeks to stay claims in the federal court action that are unrelated to the state court claims. Here, by contrast, Oppenheimer does not seek to stay or dismiss the nationwide collective action claims that will not be resolved by the Handler action”). Based on the reasoning of these cases, and the purpose of the Colorado River doctrine generally, the court concludes that, consistent with Ironridge’s motion, it may stay Scrips’ breach of contract, breach of implied covenant/tortious bad faith, and declaratory relief claims under Colorado River, while permitting Scrips’ Rule 10b-5 claim to proceed.
2. Whether a Stay Under Colorado River Would Be Appropriate
“The threshold question in deciding whether Colorado River abstention is appropriate is whether there are parallel federal and state suits.” Chase Brexton Health Services, Inc. v. Maryland, 411 F.3d 457, 463 (4th Cir.2005). In the Ninth Circuit, “exact parallelism [between the two suits] ... is not required. It is enough if the two proceedings are ‘substantially similar.’ ” Nakash v. Marciano, 882 F.2d 1411, 1416 (9th Cir.1989); see also County of Marin v. Deloitte Consulting LLP, No. C 11-00381 SI, 2011 WL 3903222, *1 (N.D.Cal. Sept. 6, 2011) (“The threshold for applying the Colorado River doctrine is whether the two cases are substantially similar. Substantial similarity does not mean that the cases must be identical”). This inquiry examines whether the suits involve the same parties and the same claims. See Nakash, 882 F.2d at 1416 (“The present parties are all named in the California suit”); see also Illinois School Dist. Agency v. Pacific Ins. Co., Ltd., 471 F.3d 714, 718 (7th Cir.2006) (“The court also rejected Pacific’s argument that the district court should abstain under [Colorado River ] because the proceedings were not parallel and because they were,between different parties involving different contracts”); Lumen Const., Inc. v. Brant Const. Co., Inc., 780 F.2d 691, 695 (7th Cir.1985) (in deciding whether cases are parallel, a court should look “for a substantial likelihood that the state litigation will dispose of all claims presented in the federal case”); Crawley v. Hamilton County Commissioners, 744 F.2d 28, 31 (6th Cir.1984) (holding that the state proceeding were not parallel because different defendants were named and the federal complaint included more allegations); Innovation Ventures, LLC v. Ultimate Lifestyles, LLC, No. 4:08-CV-232, 2009 WL 1490589, *3 (E.D.Tex. May 27, 2009) (“The Court has weighed the Colorado River factors here and finds that abstention is not appropriate at this time. Primarily, this case and the Dallas state court case involve different parties”); Becker v. Granholm, 272 F.Supp.2d 643, 645 (E.D.Mich.2003) (“[T]he Colorado River abstention doctrine is inapplicable because the requirement of a ‘parallel state proceeding’ is lacking where, as here, the state and federal lawsuits involve different parties”). The inquiry also asks whether the disputes involve, in a more general sense, the same facts. See Nakash, 882 F.2d at 1416 (“All of these disputes concern hoW the respective parties have conducted themselves since Nakash purchased a portion of Guess”).
In determining whether two suits are substantially similar, if the district court has “a substantial doubt as to whether the state proceedings will resolve the federal action [the doubt] precludes the granting of a [Colorado River ] stay.” Intel Corp. v. Advanced Micro Devices, Inc., 12 F.3d 908, 913 (9th Cir.1993). As the Supreme Court has noted,
“[w]hen 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. If there is any substantial doubt as to this, it would be a serious abuse of discretion to grant the stay or dismissal at all. Thus, the decision to invoke Colorado River necessarily contemplates that the federal court will have nothing further to do in resolving any substantive part of the case, whether it stays or dismisses.” Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 28, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).
For this reason, “[a] district court may enter a Colorado River stay order only if it has ‘full confidence’ that the parallel state proceeding will end the litigation.” Intel, 12 F.3d at 913 (citing Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 277, 108 S.Ct. 1133, 99 L.Ed.2d 296 (1988)).
The state court action and this action involve the same parties; their respective positions as plaintiff and defendant are simply reversed. The state action does not involve the federal securities claim; as noted, however, the court will not stay that claim. As for the claims that are subject of Ironridge’s Colorado River motion — Scrips’ breach of contract, breach of implied covenant/tortious bad faith, and declaratory relief claims — the court concludes that the claims are, if not exactly parallel, certainly substantially similar, as the factual basis for all of the claims is nearly identical. Specifically, Scrips’ claims in this action assert that Ironridge breached the stipulation’s express and implied terms; these are the same claims it raised as a defense to Ironridge’s application for an order enforcing the stipulation and directing the issuance of an additional 1.6 million shares of Scrips stock. The facts on which the state and federal claims are based are also the same. Scrips’ declaratory relief claim seeks both a declaration that it need not issue the 1.6 million shares the state court ordered it to issue, and a declaration that it need not issue any additional shares in the future. While the latter claim was not asserted in the state court action, it is based on the same facts as the breach of contract and breach of implied covenant/tortious bad faith claims. Indeed, the declaratory relief claim seeks a declaration that Scrips need not issue additional shares because Ironridge breached the stipulation in bad faith.
The relief Scrips seeks, moreover, also appears to be the substantially identical in both actions. In state court, Scrips seeks, inter alia, to avoid having to issue more shares of stock pursuant to the stipulation. This is what Scrips seeks here as well, in addition to damages for securities fraud and breach of express and implied terms of the parties’ agreement. Consequently, it appears the actions are substantially similar, and that the federal action is a “spin-off” of more comprehensive state litigation. See Nakash, 882 F.2d at 1416 (noting that courts “should be particularly reluctant to find that ... actions [a]re not parallel when the federal action [was] but a ‘spin off of more comprehensive state litigation”). Because there is substantial overlap between the factual allegations, legal issues, and relief sought in the state and federal actions, the court concludes that the threshold requirement of parallel federal and state actions is met.
3. Examining the Colorado River Factors
a. The Desire to Avoid Piecemeal Litigation
“Piecemeal litigation occurs when different tribunals consider the same issue, thereby duplicating efforts and possibly reaching different results.” Am. Int’l Underwriters, (Philippines), Inc. v. Continental Ins. Co., 843 F.2d 1253, 1258 (9th Cir.1988). “The mere possibility of piecemeal litigation does not constitute an exceptional circumstance.” R.R. Street & Co. Inc., 656 F.3d at 980. Rather, “the case must raise a ‘special concern about piecemeal litigation,’ which can be remedied by staying or dismissing the federal proceeding.” Id. (quoting Travelers Indem. Co. v. Madonna, 914 F.2d 1364, 1369 (9th Cir.1990)).
The parties dispute whether the state and federal actions raise the same issues. Ironridge contends that the issues are essentially identical. The state court ordered Scrips to issue 1.6 million shares of stock to Ironridge, and Scrips now seeks declaratory relief, inter alia, that it need not do so; its damages claims, moreover, are based on the fact that it had to issue more shares than it should have due to Ironridge’s allegedly fraudulent conduct. The breach of contract and tortious bad faith claims are based on conduct that Scrips argued in state court precluded the granting of Ironridge’s application to enforce the adjustment provision of the stipulated judgment. The court ultimately rejected Scrips’ arguments and granted Ironridge’s application. As noted, that order is now on appeal; it thus constitutes an ongoing proceeding. Scrips counters that this action raises “principally ... federal securities law issues” and should not be stayed. Ironridge does not seek to stay litigation of the securities fraud claim, and the court agrees that that claim cannot be stayed. See Intel Corp., 12 F.3d at 913 n. 7; Minucci, 868 F.2d at 1115; Silberkleit, 713 F.2d at 436; Krieger, 776 F.Supp.2d at 1058. It court has determined, however, that a partial stay of the remaining claims can be entered if appropriate.
Adjudication of the federal case will unquestionably involve addressing many of the same, if not all of the same, issues that are being litigated in state court. These include whether (1) Ironridge’s trading activity was a breach of the express or implied terms of the stipulation; and (2) whether Scrips was required to issue additional shares as contemplated by the contractual formula set forth in the stipulation. If these issues were to be litigated here as well as state court, there would be substantial duplication of effort. As the Supreme Court has repeatedly noted, “'wise judicial administration’” counsels against such a waste of resources. Moses H. Cone Memorial Hospital, 460 U.S. at 15, 103 S.Ct. 927 (quoting Colorado River, 424 U.S. at 818, 96 S.Ct. 1236). Nonetheless, nothing about the case “raise[s] a ‘special concern about piecemeal litigation,’ which can be remedied by staying or dismissing the federal proceeding.” R.R. Street & Co. Inc., 656 F.3d at 980 (quoting Travelers Indem., 914 F.2d at 1369). “[T]he Ninth Circuit has explained that the concern for avoidance of piecemeal litigation weighs in favor of a stay only when “there is evidence of a strong federal policy that all claims should be tried in the state courts,” ” Melt Franchising, LLC v. PMI Enterprises, Inc., No. CV 08-4148 PSG (MANx), 2008 WL 4811097, *3 (C.D.Cal. Oct. 27, 2008) (citing United States v. Morros, 268 F.3d 695, 706-07 (9th Cir.2001)). No such clear federal policy exists in this case. Therefore, this factor does not support entry of a stay.
b. The Order in Which' the Forums Obtained Jurisdiction
This factor addresses the sequence in which the courts obtained jurisdiction over the action, and examines the relative progress of each case. See R.R. Street & Co., Inc., 656 F.3d at 980; see also Moses H. Cone Mem. Hospital, 460 U.S. at 21, 103 S.Ct. 927 (holding that courts should apply this factor “in a pragmatic, flexible manner with a view to the realities of the case at hand”). “[PJriority should not be measured exclusively by which complaint was filed first, but rather in terms of how much progress has been made in the two actions.” Moses H. Cone Mem. Hospital, 460 U.S. at 21, 103 S.Ct. 927.
The state court action was filed on October 11, 2013; the court entered an-order on the parties’ stipulation on November 8, 2013. Thereafter, on May 6, 2014, the state court entered an. order enforcing the stipulated judgment and directing the issuance of 1.6 million shares of Scrips stock. Scrips appealed the order, and its opening brief was due October 15, 2014, prior to the hearing on this motion. Scrips commenced this federal action May 22, 2014; the court has yet to set a case management scheduled or take any other action. Ironridge’s motion is the first activity in the case. The state action has therefore progressed substantially further than the federal action, which weighs in favor of entering a stay. See R.R. Street & Co., Inc., 656 F.3d at 980 (concluding that state court’s “significant progress” toward resolution of dispute weighed against exercise of jurisdiction).
c. Whether Federal or State Law Provides the Rule of Decision on the Merits and Whether the State Court Proceedings Can Adequately Protect the Rights of the Federal Litigants
The court addresses these factors in tandem, as they raise overlapping issues. While “the presence of federal-law issues must always be a major consideration weighing against surrender” of jurisdiction, Ironridge does not seek a stay of Scrips’ Rule 10b-5 claim. Moses H. Cone Mem. Hospital, 460 U.S. at 25, 103 S.Ct. 927. Scrips’ breach of contract, breach of the covenant/tortious bad faith, and declaratory relief claims arise under state law. State law will therefore provide the rule of decision with respect to these claims. The existence of state law issues, by itself, does not outweigh the federal court’s obligation to provide a prompt resolution of all the claims before it, state and federal. See Travelers Indem., 914 F.2d at 1370 (stating that the presence of state law issues weighs against jurisdiction only in ‘“in some rare circumstances,’ ” and that the fact that the case raised only “routine issues of state law — misrepresentation, breach of fiduciary duty, and breach of contract—which the district court [was] fully capable of deciding” did not reflect such “rare circumstances”). Since Scrips’ state law claims involve routine issues of state law that this court is fully capable of deciding, there are no “rare circumstances” here that would justify a stay. See Travelers Indem., 914 F.2d at 1370; Melt Franchising, LLC, 2008 WL 4811097, at *3 (finding this factor weighed against dismissal or stay because state law claims were routine). Accordingly, this factor weighs against staying the federal action.
The next factor asks whether the state court proceeding can adequately protect the rights of the federal litigants. “A district court may not stay or dismiss the federal proceeding if the state proceeding cannot adequately protect the rights of the federal litigants. For example, if there is a possibility that the parties will not be able to raise their claims in the state proceeding, a stay or dismissal is inappropriate.” R.R. Street & Co. Inc., 656 F.3d at 981; see also Holder, 305 F.3d at 871 (stating that the state forum was inadequate because the “state court proceedings [would] not reach the key issues that must be adjudicated to get relief’); Travelers Indem., 914 F.2d at 1370 (“This factor involves the state court’s adequacy to protect federal rights, not the federal court’s adequacy to protect state rights,” and “ ‘is more important when it weighs in favor of federal jurisdiction,’ ” quoting Bethlehem Contracting Co. v. Lehrer/Mc