Wheaton Industries, Inc. v. Aalto Scientific, Ltd.
Filing
25
OPINION. Signed by Judge Renee Marie Bumb on 8/21/2013. (TH, ) [Transferred from New Jersey on 8/22/2013.]
[Dkt. Ent. 9]
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
WHEATON INDUSTRIES, INC.,
Plaintiff,
Civil No. 12-6965 (RMB/JS)
v.
OPINION
AALTO SCIENTIFIC, LTD.,
Defendant.
APPEARANCES:
Fredric Paul Gallin
Methfessel & Werbel, PC
3 Ethel Road
Suite 300
P.O. Box 3012
Edison, New Jersey 08818-3012
Attorney for Plaintiff
Alan Frederick Kaufman
McKenna Long & Aldridge LLP
230 Park Avenue
Suite 1700
New York, New York 10169
Attorney for Defendant
BUMB, UNITED STATES DISTRICT JUDGE:
This matter comes before the Court upon a motion to dismiss
the complaint (the “Complaint”) filed by Defendant Aalto
Scientific, Ltd. (“Aalto”). (Dkt. Ent. 9.) The motion to dismiss
argues in part that, pursuant to the first-to-file rule or 28
1
U.S.C. §§ 1404 and 1406, this Court should dismiss, abstain
from, or transfer this action to the Southern District of
California where a prior related action involving the same
parties is currently pending. See Aalto Scientific, Ltd. v.
Wheaton Indus., Inc., No. 12-02972 (S.D. Cal.) (the “California
Action”). For the reasons explained below, the Court transfers
the action to the Southern District of California.
BACKGROUND
This action arises out of a long-standing business
relationship between Aalto and Wheaton Industries, Inc.
(“Wheaton”), whereby Aalto purchased vials, stoppers, caps, and
serum bottles from Wheaton. (Compl. ¶ 8.) These products were
specifically designed by Wheaton for Aalto’s use in connection
with its manufacture of medical diagnostic testing serums and
proteins. (See id. ¶¶ 7, 9, 15.)
Aalto had placed orders for certain specialty vials since
at least 2009, and on March 29, 2011 it placed another order for
such vials. (See Affidavit of Danine S. Freeman (“Freeman
Aff.”), Dkt. Ent. 13-3 ¶¶ 7-8; Compl. ¶¶ 9, 11.) In partial
fulfillment of this order, Wheaton delivered products to Aalto
on October 31, 2011. (Compl. ¶¶ 10-12.) Although Aalto accepted
all deliveries, it failed to make payments for the products
delivered or otherwise manufactured. (Id. ¶¶ 16-17, 20.)
Instead, Aalto contended that the vials were defective. (Freeman
2
Aff. ¶ 10.) Aalto and Wheaton attempted to resolve the dispute
concerning the alleged defects and delinquent payments, but
negotiations deteriorated and then ceased sometime in 2012. (Id.
¶ 14.)
On October 19, 2012, Aalto’s insurance carrier, Federal
Insurance Co., filed a complaint in subrogation against Wheaton
in the Superior Court of California. Federal Ins. Co. v. Wheaton
Indus., Inc., No. 37-2012-00083899-CU-PO-CTL (Cal. Super. Ct.).
The complaint alleges that the products Wheaton sold to Aalto
were defective and unfit for use. (See, e.g., Declaration of
Gary K. Brucker, Jr. (“Brucker Decl.”), Ex. 2 ¶¶ 15, 24.)1 The
action remains pending in Superior Court.
Thereafter, on October 30, 2012, Aalto filed a complaint
against Wheaton, also in the Superior Court of California,
asserting nine causes of action, including breach of contract,
breach of warranty, and fraud. Aalto Scientific, Ltd. v. Wheaton
Indus., Inc., No. 37-2012-00084253-CU-BC-CTL (Cal. Super. Ct.).
In addition, the complaint seeks a declaration that Wheaton’s
products are defective and therefore Aalto does not owe Wheaton
for the defective products it has already accepted, and need not
accept or pay for additional products. (See, e.g., Brucker
1
For purposes of this motion, the Court takes judicial notice of the state
court complaints attached as Exhibits 1 and 2 to the Brucker Declaration. See
Fed. R. Evid. 201(b); United States ex rel. Geisler v. Walters, 510 F.2d 887,
890 n.4 (3d Cir. 1975); Cohen v. Telsey, No. 09-2033, 2009 WL 3747059 (D.N.J.
Nov. 2, 2009).
3
Decl., Ex. 1 at 16.) On December 13, Wheaton removed the action
to the Southern District of California, where it remains
pending. Aalto Scientific, Ltd., No. 12-02972 (S.D. Cal.)
On November 8, 2012, Wheaton filed this action asserting
claims for breach of contract, unjust enrichment, conversion,
and breach of the duty of good faith and fair dealing arising
out of Aalto’s refusal to pay for the products it ordered on
March 29, 2011. On December 14, 2012, Aalto moved to dismiss the
Complaint, arguing that (1) the Court lacks personal
jurisdiction over Aalto; (2) dismissal is warranted under the
abstention doctrines set forth in Younger v. Harris, 401 U.S. 37
(1971) or Colorado River Water Conservation District v. United
States, 424 U.S. 800 (1976);2 (3) dismissal, or at a minimum
transfer, of the action is appropriate under the first-to-file
rule or §§ 1404 and 1406; and (4) the Complaint fails to state a
claim for conversion or punitive damages.
Because Wheaton had filed a motion to dismiss the
California Action for, inter alia, lack of personal
jurisdiction, the Court convened a conference call to discuss a
possible stay of Aalto’s motion to dismiss pending a decision by
the Southern District of California. As a result of that
2
In its reply in support of the motion to dismiss, Defendant acknowledged
that these doctrines no longer apply as Wheaton removed the California Action
to federal court on the eve of the filing of Aalto’s motion to dismiss.
(Def.’s Reply, Dkt. Ent. 14 at 7.) Therefore, Defendant has abandoned this
argument.
4
conference, the Court administratively terminated Aalto’s motion
in the interests of judicial efficiency and fairness to the
parties. (Dkt. Ent. 21.) Thereafter, on August 9, 2013, the
Southern District of California denied Wheaton’s motion to
dismiss. Order, Aalto Scientific, Ltd. v. Wheaton Indus., Inc.,
No. 12-02972 (S.D. Cal.). Accordingly, Aalto’s motion is now
ripe for decision.
ANALYSIS
I.
First-to-File Rule
Aalto argues that the Court should dismiss, abstain from,
or transfer this action pursuant to the first-to-file rule.3 This
rule, also known as the first-filed rule, provides that, “[i]n
all cases of federal concurrent jurisdiction, the court which
first has possession of the subject must decide it.” Crosley
Corp. v. Hazeltine Corp., 122 F.2d 925, 929 (3d Cir. 1941). This
rule “encourages sound judicial administration and promotes
comity among federal courts of equal rank.” E.E.O.C. v. Univ. of
Pa., 850 F.2d 969, 971 -972 (3d Cir. 1988). “The first-to-file
rule applies where actions are truly duplicative such that a
3
As an initial matter, the Court finds it is appropriate to consider Aalto’s
arguments for dismissal, abstention, or transfer pursuant to the first-to-file
rule or 28 U.S.C. §§ 1404 and 1406. Although Aalto did not fully brief these
arguments in its opening memorandum, it did raise the possibility that
Wheaton’s removal of the California Action to federal court the night before
“would support a dismissal of this action pursuant to the first-to-file rule,
as well as a transfer of this matter pursuant to 28 U.S.C. §§ 1404 & 1406, for
the reasons set forth” in its memorandum. (Def.’s Mem., Dkt. Ent. 9, at 5
n.2.) Wheaton briefly addressed these arguments in its opposition to the
5
determination in one action leaves little or nothing to be
determined in the other.” Nat’l Cas. Co. v. Hertz Equip. Rental
Corp., No. 12-5048, 2013 WL 2242653, at *1 n.4 (D.N.J. May 21,
2013) (citing Catlin Specialty Ins. Co. v. Plato Const. Corp.,
No. 10–5722, 2012 WL 924850, at *4 (D.N.J. Mar. 19, 2012)); see
also Grider v. Keystone Health Plan Cent., Inc., 500 F.3d 322,
334 (3d Cir. 2007). However, the issues and parties need not be
identical. Maximum Human Performance, Inc. v. Dymatize Enters.,
Inc., No. 09-235, 2009 WL 2778104, at *2-3 (D.N.J. Aug. 27,
2009), report & recommendation adopted by, 2009 WL 2952034
(D.N.J. Sept. 14, 2009).
The first-to-file rule permits a court to dismiss, stay, or
transfer the later-filed action. See, e.g., Maximum Human
Performance, 2009 WL 2778104, at *2; Keating Fibre Int’l, Inc.
v. Weyerhaeuser Co., Inc., 416 F. Supp. 2d 1048, 1052-53 (E.D.
Pa. 2006). In deciding a motion to dismiss, stay, or transfer
pursuant to the first-to-file rule, a court must consider the
same factors applicable to a motion to transfer under § 1404(a)
(which Aalto has also made). Maximum Human Performance, 2009 WL
2778104, at *2; Nature’s Benefit, Inc. v. NFI, No. 06-4836, 2007
U.S. Dist. LEXIS 62871, at *8 (D.N.J. Aug. 27, 2007). “If the
factors balance in favor of the first to file rule, then a court
motion to dismiss (Pl.’s Opp., Dkt. Ent. 13 at 10-11), and Aalto fully
responded in its reply (Def.’s Reply 7-10).
6
may properly dismiss, stay or transfer the second-filed action
to avoid duplicative litigation under its ‘inherent power.’”
Nature’s Benefit, 2007 U.S. Dist. LEXIS 62871, at *8-9.
A. The First-to-File Rule Applies.
As Wheaton concedes, because Aalto filed the California
Action in the Superior Court of California on October 30, 2012,4
and Wheaton filed this action on November 8, 2012, it is
undisputed that the California Action was the first-filed
action. (See Pl.’s Opp. 11.) The two actions involve the same
parties as well as the same subject matter – Wheaton’s alleged
provision of defective products and Aalto’s alleged failure to
pay for those products. (See, e.g., Compl. ¶¶ 11-20; Brucker
Decl., Ex. 1 ¶¶ 2-3.) Neither party disputes the nearlyidentical nature of these two actions. Rather, Wheaton argues
only that the Southern District of California does not have
personal jurisdiction over it, but that court recently denied
Wheaton’s motion to dismiss on those grounds. Order, Aalto
Scientific, Ltd., No. 12-02972 (S.D. Cal. Aug. 9, 2013) (finding
sufficient contacts to support general and specific jurisdiction
4
Although the California Action was not removed to the Southern District of
California until after the New Jersey action was filed, the relevant date for
purposes of the first-filed analysis is the date of the original filing. See,
e.g., Jermax, Inc. v. AK Steel Corp., 2010 WL 2652276, at *6 (D.N.J. June 24,
2010) (“That the original suit began in state court and was removed to federal
court is immaterial; the first-filed rule still looks to the original date of
filing. Because Jermax commenced its action in New Jersey Superior Court
before AK Steel filed its action in the federal court in Ohio, Jermax's suit
is deemed [] the first filed.”).
7
over Wheaton and holding that venue is proper in the Southern
District of California). Thus, this Court and the Southern
District of California have concurrent jurisdiction over nearly
identical actions.5 As Aalto points out, this is precisely the
situation that the first-to-file rule is intended to avoid.
Wheaton suggests that the first-to-file rule does not apply
here because Wheaton served the Complaint on Aalto before Aalto
served it with the complaint in the California Action. The Court
disagrees. “The filing of the Complaint, and not service, is the
operative trigger for the first-to-file rule. Hence, it is not
called the ‘first-to-file-and-serve’ rule.” Allianz Life Ins.
Co. of N. Am. V. Estate of Bleich, No. 08-cv-668, 2008 WL
4852683, at *4 (D.N.J. Nov. 6, 2008). Moreover, none of the
circumstances that may permit a court to depart from the firstto-file rule exist here. Those circumstances include bad faith
on the part of the party who filed first, forum-shopping,
inequitable conduct, and where the second-filed action has
progressed more quickly than the first. See, e.g., Nature’s
Benefit, 2007 U.S. Dist. LEXIS 62871, at *9. In the absence of
such circumstances, the first-to-file rule applies.
5
Aalto disputes that this Court has personal jurisdiction over it but
acknowledges that, for purposes of this motion, “the Court may simply assume
personal jurisdiction is proper.” (Def.’s Mem. 8 n.1.)
8
B. The 1404(a) Factors Favor Transfer.
Having determined that the first-to-file rule is implicated
by the present situation, the Court must now determine whether
to dismiss, stay, or transfer the current action. In doing so,
the Court must consider the same factors applicable to a motion
to transfer pursuant to § 1404(a). Section 1404(a) permits a
district court to transfer a civil action, for the convenience
of parties and witnesses or in the interest of justice, to
another district where the action may have been brought. In
assessing whether a transfer is in the interest of justice, a
court should “consider both the private and public interests
affected by the transfer.” Bus. Store, Inc. v. Mail Boxes Etc.,
No. 11-3662, 2012 WL 525966, at *3 (D.N.J. Feb. 16, 2012)
(citation omitted). The private interests include:
(1) plaintiff's forum preference as manifested in the
original choice; (2) the defendant's preference;
(3) whether the claim arose elsewhere; (4) the
convenience of the parties as indicated by their
relative physical and financial condition; (5) the
convenience of the witnesses (only to the extent that
the witnesses may actually be unavailable for trial in
one of the fora; and (6) the location of books and
records (only to the extent that the files could not
be produced in the alternative forum).
Digital Tech. Licensing LLC v. Sprint Nextel Corp., No. 07-5432,
2011 WL 1899279, at *3 (D.N.J. May 19, 2011); see also Jumara v.
State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995). The public
interests include: 1) the enforceability of the judgment; 2)
9
practical considerations that could make the trial easy,
expeditious or inexpensive; 3) any relative administrative
difficulty resulting from court congestion; 4) local interest in
deciding local controversies; 5) public polices of the fora; and
6) trial judge’s familiarity with the applicable state law in
diversity cases. Jumara, 55 F.3d at 879-80.
Here, there is no question that venue is appropriate in the
Southern District of California because “a substantial part of
the events or omissions giving rise to the claim occurred”
there. See 28 U.S.C. § 1391(a)(2). Specifically, Wheaton
contracted with Aalto, a California company, to supply it with
the purportedly defective vials. (Compl. ¶¶ 2, 8.) Wheaton
manufactured the vials in New Jersey but shipped them directly
to Aalto’s facilities in California (Freeman Aff. ¶ 8), where
Aalto used them to package their medical testing supplies
(Compl. ¶ 9). Aalto also contends, and Wheaton does not dispute,
that Alto’s dealings with Wheaton were primarily conducted
through Wheaton’s California-based sales manager. (Declaration
of Jeff Mauro, Dkt. Ent. 9-3 ¶ 7.) Notably, the Southern
District of California found these connections to California
sufficient to support specific personal jurisdiction over
Wheaton. Order, Aalto Scientific, Ltd., No. 12-02972, at 3-5
(“Plaintiff’s claims arising from the defective vials arise out
of Defendant’s forum related activities . . . .”); see also
10
Clark v. Burger King Corp., 255 F. Supp. 2d 334, 337 (D.N.J.
2003).
In addition, most of the private factors favor transfer to
the Southern District of California. The only factor that weighs
against transfer in this case is the plaintiff’s choice of
forum. Although “the plaintiff’s choice of venue should not be
lightly disturbed,” Jumara, 55 F.3d at 879, that choice is not
dispositive. Maximum Human Performance, 2009 WL 2778104, at *7.
Wheaton’s contract-based claims arise out of Aalto’s nonpayment
of invoices and receipt of products in California. Most
significantly, however, there are two other actions involving
the same factual background that are proceeding in California.
These two related actions will necessitate production of the
same witnesses and other documentary evidence as the instant
case. Therefore, the convenience of the parties and witnesses
strongly suggest permitting all of these related actions to
proceed in a single forum.
For similar reasons, the public factors favor transfer. “To
permit a situation in which two cases involving precisely the
same issues are simultaneously pending in different District
Courts leads to the wastefulness of time, energy and
money . . . .” Continental Grain Co. v. Barge FBL–585, 364 U.S.
19, 26 (1960). Moreover, “[i]t is in the interests of justice to
permit suits involving the same parties and issues to proceed
11
before one court and not simultaneously before two tribunals.”
Job Haines Home for the Aged v. Young, 936 F. Supp. 223, 233
(D.N.J. 1996) (quoting Ricoh Co. v. Honeywell, Inc., 817 F.
Supp. 473, 487 (D.N.J. 1993)). The fact that there are two
California actions related to the same subject matter and
proceeding before two separate courts is complication enough.
This Court will not add to it by permitting a third action to
proceed before it.
The parties have presented no other compelling reason why
this action should not be transferred to the Southern District
of California. Therefore, because both private and public
factors weigh in favor of transfer, the Court hereby transfers
this action to the Southern District of California pursuant to
the first-to-file rule.
II.
Motion to Transfer Under Section 1404
Aalto also moved to transfer the action under § 1404. The
Court considered the relevant factors as part of its analysis
above under the first-to-file rule and finds that, in the
alternative, § 1404 supports transfer to the Southern District
of California.
In light of its ruling, the Court need not address Aalto’s
additional arguments for dismissal or transfer.
12
CONCLUSION
For the reasons set forth above, Aalto’s motion to dismiss
is granted in so far as it requests that this action be
transferred to the Southern District of California, and is, in
all other respects, denied.
s/Renée Marie Bumb
RENÉE MARIE BUMB
UNITED STATES DISTRICT JUDGE
DATED:
August 21, 2013
13
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?