UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
November 7, 2011
AMERICAN NEWLAND COMMUNITIES, L.P., ET AL.,
AXIS SPECIALTY INSURANCE COMPANY,
The opinion of the court was delivered by: Honorable Janis L. Sammartino United States District Judge
ORDER (1) DENYING MOTION TO DISMISS OR TRANSFER; (2) GRANTING, IN THE ALTERNATIVE, MOTION TO STAY; (3) DENYING, IN THE ALTERNATIVE, MOTION TO TRANSFER PURSUANT TO 28 U.S.C. § 1404(a); AND (4) DENYING AS MOOT MOTIONS TO STRIKE AND REQUEST FOR JUDICIAL NOTICE (ECF Nos. 6, 17, 18, 19)
Presently before the Court is Defendant Axis Specialty Insurance Company's ("Defendant" or "Axis") motion to dismiss, stay or transfer for improper venue or in the alternative to transfer for convenience pursuant to 28 U.S.C. § 1404(a). (Mot. to Dismiss, ECF No. 6) Also before the Court is American Newland Communities, LP; Newland IHP Ventures, LLC; Newland Real Estate Group, LLC; Terrabrook Vista Lakes, L.P.; Terrabrook Vista Lakes GP, LLC; and Westerra Management, L.L.C.'s (collectively, "Insureds") response in opposition (Resp. in Opp'n, ECF No. 12), and Defendant's reply in support, (Reply in Supp., ECF No. 17). Having considered the parties' arguments and the law, the Court GRANTS Defendant's motion to stay.
The instant case involves a declaratory judgment action regarding an insurance dispute, namely, whether Defendant has a duty to defend the Insureds in several underlying actions alleging damages arising from the purchase of homes that were allegedly built on or immediately adjacent to a former military bombing range. (Compl. ¶ 1, ECF No. 1-1)
On April 8, 2011 Defendant filed a declaratory judgment action in the Southern District of California; that action was voluntarily dismissed by Defendant on April 27, 2011. (Resp. in Opp'n 3, ECF No. 12)
Subsequently, on May 6, 2011, Defendant filed a second declaratory judgment action, this time in the Middle District of Florida ("Florida Action"). (Id.); (Mot. to Dismiss 2, ECF No. 6) That complaint "seeks a declaration that [Defendant] is not required to provide liability coverage and a defense to plaintiffs in the Underlying Florida Actions under the terms and conditions of the Policy . . . and is entitled to recoupment of the costs incurred in the defense of the non-covered claims in the underlying lawsuits." (Mot. to Dismiss 2, ECF No. 6) In addition to all but one of the Insureds named as plaintiffs in the instant complaint, the Florida Action names several of the representative plaintiffs in the underlying actions. (Id. at 2--3)
Three days-but just one business day-after the Florida Action was filed, on May 9, 2011, the Insureds filed a complaint for declaratory relief in the Superior Court of the State of California for the County of San Diego ("California Action"), seeking a declaration that Defendant was required to defend the Insureds in the underlying actions. (Compl., ECF No. 1-1) The complaint did not name any of the plaintiffs in the underlying actions as defendants. (See id.) Defendant removed the complaint to this Court on June 3, 2011. (Not. Removal, ECF No. 1)
"[T]he well-established 'first to file rule' . . . allows a district court to transfer, stay, or dismiss an action when a similar complaint has already been filed in another federal court." Alltrade, Inc. v. Uniweld Prods., Inc., 946 F.2d 622, 623 (9th Cir. 1991). "In applying this rule, a court looks at three threshold factors: (1) the chronology of the two actions; (2) the similarity of the parties; and (3) the similarity of the issues." Z-Line Designs, Inc. v. Bell'O Int'l LLC, 218 F.R.D. 663, 665 (N.D. Cal. 2003).
Although the first to file rule "should not be disregarded lightly," Church of Scientology v. U.S. Dep't of the Army, 611 F.2d 738, 750 (9th Cir. 1979), the district court has discretion to disregard the first to file rule in the interest of equity when there are circumstances of bad faith, anticipatory suit, or forum shopping, Alltrade, 946 F.2d at 628 (citations omitted). "A court may also refuse to apply the first to file rule if the balance of convenience weighs in favor of the later-filed action." Z-Line Designs, 281 F.R.D. at 665. However, "the respective convenience of the two courts 'normally . . . should be addressed to the court in the first-filed action.'" Alltrade, 946 F.2d at 628 (quoting Pacesetter Sys., Inc. v. Medtronic, Inc., 678 F.2d 93, 96 (9th Cir. 1982)).
1. First to File Rule
A. Chronology of the Two Actions
Defendant's action pending in the Middle District of Florida was indisputably filed prior to the Insureds' complaint in the California Action. The fact that Defendant's action was filed just three days, or one business day, prior to the Insureds' action does not defeat the Court's finding that chronologically, Defendant's action was filed first. See Z-Line Designs, 218 F.R.D. at 665 (finding the chronology requirement met where one complaint was filed two days before the other).*fn1
B. Similarity of the Parties
Although the parties in the action before this Court and in the action before the Middle District of Florida court are not identical, they are similar. In the Florida Action, Axis named the following defendants: American Newland Communities, L.P. ("American Newland"); Newland Communities, LLC; Terrabrook Vista Lakes L.P.; Terrabrook Vista Lakes GP, LLC; Westerra Management, LLC; and several of the plaintiffs from the underlying actions. (Ex. B at 4, ECF No. 6-2)*fn2 All of these defendants except the plaintiffs from the underlying actions are named plaintiffs in the California Action before this Court. However, theCalifornia Action includes one additional plaintiff who is not a party to the Florida Action: Newland IHP Ventures, LLC "(Newland IHP").
The Insureds argue that the first to file rule is inapplicable here because the parties in the two pending actions are not identical. (Resp. in Opp'n 4, ECF No. 12) In addition to the absence of the underlying plaintiffs from the California Action and Newland IHP's absence from the Florida Action, the Insureds argue that American Newland is "likely to be dismissed from the Axis Florida Action due to the Florida court's lack of personal jurisdiction over it." (Id.)*fn3
Even assuming Florida cannot exercise personal jurisdiction over American Newland and Newland IHP is not added as a party to the Florida Action, the presence or absence of certain parties from the pending actions is not dispositive as "exact identity is not required to satisfy the first-to-file rule. The rule is satisfied if some [of] the parties in one matter are also in the other matter, regardless of whether there are additional unmatched parties in one or both matters." Intersearch Worldwide, Ltd. v. Intersearch Grp., Inc., 544 F. Supp. 2d 949, 959 n.6 (N.D. Cal. 2008) (citing Kerotest Mfg. v. C-O-Two Fire Equip. Co., 189 F.2d 31 (3d Cir. 1951); Inherent.com v. Martindale-Hubbell, 420 F. Supp. 2d 1093, 1097 (N.D. Cal. 2006); Dumas v. Major League Baseball Props., Inc., 52 F. Supp. 2d 1183, 1189 (S.D. Cal. 1999), vacated on other grounds by, 104 F. Supp. 2d 1224 (S.D. Cal. 2000), aff'd, 300 F.3d 1083 (9th Cir. 2002)); see also British Telecomms., 1993 U.S. Dist. LEXIS 6345, at *13 ("Alltrade . . . does not stand for a blanket rule that there must be strict identity of parties for the first-to-file rule to apply."). Here, at least five of the parties are identical between the two actions. Thus, the Court finds that there is substantial overlap and similarity between the parties such that the first to file rule may apply.
C. Similarity of the Issues
The Insureds do not contest and the Court concludes that the issues in the Florida and California Actions are similar. Both actions seek a declaration as to Axis's duty to defend the underlying actions. As with the similarity of parties requirement, the similarity of issues requirement does not require that the issues in the two actions be identical. Thus, the fact that Axis also seeks a declaration that it is entitled to recoupment of costs in the Florida Action-an issue that is not before this Court-does not alter the Court's conclusion that the issues in the two pending actions are sufficiently similar for the first to file rule to apply.
2. Exceptions to First to File Rule
Having determined that the threshold requirements for the first to file rule apply to the instant case, the Court next considers whether an exception should apply to preclude its application. The Insureds make several arguments for why the first to file rule should not be applied here.
First, the Insureds contend that the order of the filings should be given little weight because Defendant's action was filed just one business day before the present action. (Id.)Courts have indeed declined to apply the first to file rule where "the timeline shows that the first party to file merely nosed ahead in its race to the courthouse," typically through the application of an exception to the rule where it appears the first-filed suit was anticipatory. Geltech Solutions, Inc. v. Marteal, Ltd., No. 09-CV-81027, 2010 U.S. Dist. LEXIS 44118, at *20 (S.D. Fla. May 5, 2010). Here, however, it does not appear to the Court that Defendant's Florida Action was filed merely in anticipation of the Insureds' action; in fact, Defendant had previously filed a similar action in California a full month prior to the Insured's filing. As such, the Court finds no justification for affording the order of the two filings "little or no weight," id., despite the close proximity in time.
Second, according to the Insureds, Defendant has engaged in "blatant" forum shopping given that it originally chose the Southern District of California as the forum for this litigation and only voluntarily dismissed and refiled in the Middle District of Florida after learning which judge was assigned to the case in its original filing. (Resp. in Opp'n 4--5, ECF No. 12) Thus, they argue that the first to file rule should not apply here because it was Defendant's acts of dismissing and then refiling its complaint in a different district that created the potential for duplicative litigation that Defendant now complains of. (Id. at 4)
While Defendant's filing pattern does raise questions regarding its motives, Defendant provides several plausible justifications for its decision to refile in the Middle District of Florida, and as such the Court cannot conclude that it acted in bad faith or engaged in forum shopping. For example, Defendant indicates that Florida is a logical forum for the instant dispute because it is the venue of all of the underlying actions, the events giving rise to those actions all took place in Florida, the underlying actions all involve violations of Florida law, and any witnesses are located in Florida. Thus, despite Defendant's bait and switch, the Court declines to exercise its discretion to disregard the first to file rule on this basis. See British Telecomm., 1993 U.S. Dist. LEXIS 6345, at *10.
Third and finally, the Insureds assert that the Court should relax the first to file rule here because the balance of convenience weighs in favor of the California Action. (Resp. in Opp'n 6, ECF No. 12) Specifically, the Insureds contend that California is a more convenient forum because it would be inconvenient for the Insureds to litigate in Florida rather than their home state of California, (id. at 6--7), and that Defendant's initial filing in California "is a tacit admission that this form was an appropriate and convenient forum for Axis itself," (id. at 6). For the reasons given above, however, Defendant also points to several convenience factors weighing in favor of Florida being the more convenient forum. Thus, because consideration of the respective convenience of the two courts is typically addressed to the court in the first-filed action, Alltrade, 946 F.2d at 628, and because the Court finds that the balance of convenience is neutral or at most only slightly more favorable to the California forum, it declines to exercise its discretion to depart from the first to file rule here.
3. Dismissal or Stay
Because the threshold requirements for the first to file rule are met and no exceptions apply, the question becomes whether to dismiss or stay the case. Although a district court may, in its discretion, dismiss the second-filed action in applying the first to file rule, where there is "jurisdictional uncertainty," Alltrade, 946 F.2d at 628, or "where the first-filed action presents a likelihood of dismissal, the second-filed suit should be stayed rather than dismissed," id. at 629. Here, without positing on the Florida court's ability to exercise jurisdiction, the Court finds that a stay is more appropriate given the uncertainty of the outcome of the issues before the Middle District of Florida. Should the Florida court determine that it lacks jurisdiction to hear the matter or choose to exercise its discretion to apply an exception to the first-to-file rule based on the balance of convenience and transfer the case to this district, the Court may then lift the stay and proceed.
For the reasons stated above, the Court DENIES Defendant's motion to dismiss or to transfer based on the first to file rule, and GRANTS Defendant's motion, in the alternative, to stay. It is HEREBY ORDERED that this action is STAYED pending further order from the Court. Having decided to stay the action, Defendant's alternative motion to transfer pursuant to 28 U.S.C. § 1404(a) is DENIED.
IT IS SO ORDERED.