United States District Court, S.D. California
SHARP HEALTH PLAN, a California nonprofit public benefit corporation, Plaintiff,
HEALTHEDGE SOFTWARE, INC., a Delaware corporation; DOES 1 through 10, inclusive, Defendants.
ORDER STAYING ACTION PURSUANT TO THE FIRST-TO-FILE
RULE (ECF NOS. 11, 14, 15)
Janis L. Sammartino United States District Judge.
before the Court are Plaintiff Sharp Health Plan's
(“Sharp”) (“Pl.'s Br., ” ECF No.
15) and Defendant HealthEdge Software, Inc.'s
(“HealthEdge”) (“Def.'s Br., ”
ECF No. 14) Responses to the Court's June 10, 2019 Order
to Show Cause Why This Action Should Not Be Stayed,
Transferred, or Dismissed Pursuant to the First-to-File Rule
(“OSC, ” ECF No. 11). Having carefully considered
the Parties' Responses, the complaints, the evidence, and
the relevant law, the Court STAYS this
action pursuant to the first-to-file rule.
is a California nonprofit public benefit corporation that
provides health care service plans and related administrative
services for its members. ECF No. 1 (“Compl.”)
¶ 1. HealthEdge is a Delaware corporation that develops,
markets, and licenses computer software applications to
health plans such as Sharp. Id. ¶ 2.
2014, Sharp and HealthEdge entered into a software as a
service agreement (the “SAAS”), pursuant to which
Sharp would utilize HealthEdge's software for essential
administrative functions, id. ¶ 12, and a
professional services agreement (the “PSA”),
under which HealthEdge and Sharp would enter into one or more
statements of work (“SOW”) for the provision of
professional services with regard to HealthEdge's
software. Id. ¶ 13. Sharp and HealthEdge
subsequently entered into two SOWs, with the first (the
“SOW-1”) to determine what would be necessary for
the implementation of certain aspects of HealthEdge's
software and the second (the “SOW-2”) to provide
professional services related to the actual implementation of
portions of HealthEdge's software. Id. ¶
2018, a dispute arose as to HealthEdge's performance
under the SAAS and PSA/SOW-2. See Def.'s Br. at
2. Sharp sent letters to HealthEdge on July 2, 2018, and
September 7, 2018, alleging that HealthEdge had breached the
terms of the SAAS and the PSA/SOW-2. See Id. at 4.
As required under their agreements, the Parties mediated the
dispute on April 30, 2019. See id.; see
also Pl.'s Br. at 1. The mediation was unsuccessful.
the mediation, HealthEdge filed a declaratory relief action
against Sharp in the District of Massachusetts,
HealthEdge Software, Inc. v. Sharp Health Plan, No.
1:19-cv-11020-ADB (D. Mass. Filed Apr. 30, 2019) (the
“Massachusetts Action”). In the Massachusetts
Action, HealthEdge asks the court to enter a declaration
that: (1) HealthEdge did not breach the SAAS, (2) HealthEdge
did not breach the SOW-2, and (3) HealthEdge did not engage
in misrepresentations or act fraudulently under the SAAS and
SOW-2. See ECF No. 15-1 (“RJN”) Ex. 1
(“Mass. Compl.”) ¶¶
28-32. The following day, counsel for HealthEdge
emailed a copy of the Massachusetts Complaint to Sharp's
counsel. See Def.'s Br. Ex. 2 at 16. Sharp's
counsel returned a Waiver of the Service of Summons on May
14, 2019. See Def.'s Br. Ex. 3 at 18.
18, 2019, Sharp filed suit against HealthEdge in the Superior
Court of California, County of San Diego. See ECF
No. 1 Ex. A (“Compl.”). Sharp alleged six causes
of action for fraud pursuant to California Civil Code
sections 1710(1)-(2), (3), and (4); specific performance;
breach of contract; and violation of California Business and
Professions Code sections 17200 through 17203. See
generally Id. HealthEdge removed to this Court on May
24, 2019. See generally ECF No. 1.
HealthEdge filed a Notice of Related Cases concerning the
Massachusetts Action on June 7, 2019, see generally
ECF No. 7, the Court issued the OSC on June 10, 2019. See
generally ECF No. 11.
first-to-file rule allows a district court to stay
proceedings if a similar case with substantially similar
issues and parties was previously filed in another district
court.” Kohn Law Grp., Inc. v. Auto Parts Mfg.
Miss., Inc., 787 F.3d 1237, 1239 (9th Cir. 2015). It
“is intended to ‘serve the purpose of promoting
efficiency well and should not be disregarded
lightly.'” Id. (quoting Alltrade, Inc.
v. Uniweld Prods., Inc., 946 F.2d 622, 625 (9th Cir.
1991)). “The first-to-file rule may be applied
‘when a complaint involving the same parties and issues
has already been filed in another district.'”
Id. at 1240 (quoting Alltrade, 946 F.2d at
625). “Thus, a court analyzes three factors: chronology
of the lawsuits, similarity of the parties, and similarity of
the issues.” Id. (citing Alltrade,
946 F.2d at 625).
case meets the requirements of the first-to-file rule, the
court has the discretion to transfer, stay, or dismiss the
action. Alltrade, 946 F.2d at 628-29. Even when the
rule would otherwise apply, however, the court has the
discretion to “dispense” with its application
“for reasons of equity.” Id. at 628.
contends that the Court should dismiss, stay, or transfer
this action to the District of Massachusetts pursuant to the
first-to-file rule. See Def.'s Br. at 1. Sharp,
on the other hand, contends that the first-to-file rule
should not be applied for three reasons: (1) the
Massachusetts Action faces “jurisdictional
uncertainties” because HealthEdge must establish that
the Massachusetts court has personal jurisdiction over Sharp
and the Massachusetts court has discretion not to entertain
HealthEdge's declaratory relief claims, see
Pl.'s Br. at 2-3; (2) the Court cannot determine whether
there is the requisite similarity of issues because the
Massachusetts Complaint is “cryptic” and its is
unclear which, if any, declaratory relief claims the
Massachusetts court will hear, see Id. at 4; and (3)
equitable considerations weigh against application of the
first-to-file rule here because “Sharp was effectively
the ‘first to file' when it initiated the
contractual mediation ...