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Snapology Jewelry, LLC v. LDC, Inc.

United States District Court, W.D. Michigan, Southern Division

May 4, 2017

Snapology Jewelry, LLC, Plaintiff,
v.
LDC, Inc., Defendant.

          OPINION AND ORDER

          HONORABLE PAUL L. MALONEY JUDGE

         This matter is before the Court on Defendant LDC's motion to dismiss or transfer. (ECF No. 17.) Defendant argues, among other things, that Plaintiff Snapology surreptitiously sought to file this declaratory action in Michigan while inducing Defendant to delay its own intentions to file an infringement action in Rhode Island.

         The Court agrees. Plaintiff filed what is known as an “anticipatory” declaratory judgment action that was irrefutably improper under the circumstances. Two independent bases justify dismissing this action without prejudice to allow Plaintiff to file a counter-complaint in the United States District Court for the District of Rhode Island: (1) the “generally recognized doctrine of federal comity which permits a district court to decline jurisdiction over an action when a complaint involving the same parties and issues has already been filed in another district, ” Pacesetter Sys., Inc. v. Medtronic, Inc., 678 F.2d 93, 94-95 (9th Cir. 1982); and (2) the Court's “[d]iscretion not to hear a declaratory judgment action, even [though] jurisdiction exists, ” Zide Sport Shop of Ohio, Inc. v. Ed Tobergte Assocs., Inc., 16 F. App'x 433, 437 (6th Cir. 2001) (citing Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494 (1942)). Accordingly, this action must be dismissed without prejudice.

         “As between federal district courts, . . . though no precise rule has evolved, the general principle is to avoid duplicative litigation.” Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976).[1] Application of this generally recognized doctrine of federal comity necessitates that “an ample degree of discretion, appropriate for disciplined and experienced judges, must be left to the lower courts.” Kerotest Mfg. Co., 342 U.S. at 183-84; accord. Medtronic, 678 F.3d at 95.

         “Normally sound judicial administration would indicate that when two identical actions are filed in courts of concurrent jurisdiction, the court which first acquired jurisdiction should try the lawsuit and no purpose would be served by proceeding with a second action. However, this ‘first to file' rule is not a rigid or inflexible rule to be mechanically applied, but rather is to be applied with a view to the dictates of sound judicial administration.” Medtronic, 678 F.2d at 94-95.

         “Factors that weigh against enforcement of the first-to-file rule include extraordinary circumstances, inequitable conduct, bad faith, anticipatory suits, and forum shopping. Zide, 16 F. App'x at 437 (citing Alltrade, Inc. v. Unwield Prods., Inc., 946 F.2d 622, 628 (9th Cir. 1991) and E.E.O.C. v. Univ. of Pennsylvania, 850 F.2d 969, 972 (3d. Cir. 1988)). Similarly, “[d]iscretion not to hear a declaratory judgment action, even where jurisdiction exists, is undisputed”-and discretion in that vein is particularly appropriate where plaintiffs “engage[] in procedural fencing.” Zide Sport Shop of Ohio, Inc., 16 F. App'x at 437.[2]

         In Zide, the Sixth Circuit affirmed a district court's reconciliation and application of an exception to the first-to-file rule and the declaratory judgment standard. Id. There, the plaintiffs misled defendants by going along with written negotiations while proceeding to file a lawsuit. Id. The plaintiffs knew if a settlement was not reached, the defendants would seek legal recourse. Id. Plaintiffs filed a lawsuit the day before a negotiation period expired. Id.

         The Sixth Circuit quoted the district court's findings, and upheld dismissal:

If Plaintiffs' conduct was not mere deceptive gamesmanship, then they would have informed Defendants that they did not intend to make another settlement offer and would prefer to seek a judicial resolution. If it was not gamesmanship, Plaintiffs would not have filed suit in this Court during the extension period they requested . . . .

Id. at 438.

         The facts in this case closely resemble those in Zide and a host of other cases. See, e.g., Tempco Elec. Heater Corp. v. Omega Eng'g, Inc., 819 F.2d 746, 749 (7th Cir. 1987); Teledyne Tech. Inc. v. Harris Corp., 2011 WL 2605995, at *3 (C.D. Cal. July 1, 2011); NSI Corp. v. Showco, Inc., 843 F.Supp. 642, 646 (D. Or. 1994).

         On June 14, 2016, LDC's counsel sent a demand letter to Snapology. (ECF No. 18-3 at PageID.255.) Two weeks later, LDC's counsel engaged in settlement with Snapology's counsel on the telephone regarding the claims asserted by LDC. (Id.) Snapology's counsel led LDC's counsel to believe “the parties had reached an understanding of working toward a prompt out of court settlement.” (Id.) Correspondence continued. On July 8, 2016, LDC's counsel sent further correspondence to Snapology's counsel, giving ten days to respond “if [Snapology] is still willing to attempt to resolve this matter voluntarily.” (Id. at PageID.269.) On July 15, 2016, Snapology's counsel responded: “I have a meeting with my client on Monday to review and respond to your demand. I will follow up by Tuesday[]”- roughly within the ten-day timeframe. (Id.)

         However, Snapology did not “respond to [LDC's] demand, ” as promised, on Tuesday; rather, on that very same day, it rushed to file a declaratory judgment action in Muskegon County ...


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