Dumanian et al v. Schwartz et al
ORDER. The Clerk of Court shall transfer this case to the United States District Court for the Northern District of Illinois. Plaintiffs' Motion for Preliminary and Permanent Injunction 7 is DENIED AS MOOT. Defendant Mark Schwart's Motion to Dismiss and For Sanctions for Perjury 19 is DENIED AS MOOT. This case is closed, by Chief Judge Philip A. Brimmer on 3/31/21.(sgrim)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Chief Judge Philip A. Brimmer
Civil Action No. 20-cv-01800-PAB-MEH
DR. GREGORY DUMANIAN, and
ADVANCED SUTURE, INC.,
MARK SCHWARTZ and
MARK ALAN SCHWARTZ REVOCABLE TRUST DATED 12/1/2017,
This matter is before the Court on the August 25, 2020 order of the Court
directing the parties to file briefs addressing whether or not they oppose transfer of this
action to the United States District Court for the Northern District of Illinois. Docket No.
34. Plaintiffs filed a brief in opposition [Docket No. 37] and defendants filed a brief
consenting to transfer. Docket No. 38.
This case is part of a dispute between Gregory Dumanian (“Dr. Dumanian”) and
Mark A. Schwartz (“Schwartz”) as to who controls Mesh Suture, Inc. (“Mesh Suture”),
and its sister company Advanced Suture, Inc. (“Advanced Suture”). See No. 19-cv03218-PAB-GPG (D. Colo.); No. 19-cv-06771 (N.D. Ill.) (Lee, J.) (the “Illinois lawsuit”).
In the Illinois lawsuit, filed by Dr. Dumanian and his family, Dr. Dumanian alleges that
Schwartz obtained invalid board resolutions (the “Board Resolutions”) that gave
Schwartz control of Mesh Suture from Dr. Dumanian by, essentially, extorting him with
the approximately $4 million in Mesh Suture’s bank account. See No. 19-cv-06771,
Docket No. 16 at 13-18. The Dumanians seek, inter alia, rescission of the Board
Resolutions in the Illinois lawsuit. Id. at 20-22. In this lawsuit, Dr. Dumanian alleges
that Schwartz used the Board Resolutions to issue himself shares of stock in Advanced
Suture. No. 20-cv-01800, Docket No. 1 at 18. Although Dr. Dumanian claims that the
Board Resolutions do not apply to Advanced Suture on their own terms, in the
alternative he seeks rescission of the Board Resolutions. Id. at 28-29. Schwartz claims
that a settlement agreed to on September 10, 2019 gives him control over both
companies. Docket No. 19 at 3. Dr. Dumanian seeks rescission of that settlement
agreement in the Illinois lawsuit. No. 19-cv-06771, Docket No. 16 at 22-23. Due to the
similarity in between this case and the Illinois lawsuit, the Court ordered the parties the
brief whether this case should be transferred to the Northern District of Illinois under the
first-to-file rule. See No. 20-cv-01800, Docket No. 34.
II. LEGAL STANDARD
The first-to-file rule applies “when two district courts have jurisdiction over the
same controversy, affording deference to the first filed lawsuit.” Lipari v. U.S. Bancorp
NA, 345 F. App’x 315, 317 (10th Cir. 2009) (unpublished); see also Hospah Coal Co. v.
Chaco Energy Co., 673 F.2d 1161, 1163 (10th Cir. 1982) (recognizing general rule that
“when two courts have concurrent jurisdiction, the first court in which jurisdiction
attaches has priority to consider the case”); Wakaya Perfection LLC v. Youngevity
International, Inc., 910 F.3d 1118, 1124-27 (10th Cir. 2018) (noting that the first-to-file
analysis requires a court to consider the chronology of events, the similarity of the
parties and issues or claims, and any equitable considerations).
The rule is a discretionary doctrine, resting on “principles of comity and sound
judicial administration” and is concerned with avoiding duplicative litigation, rulings
which impinge on the authority of sister courts, and piecemeal litigation. Cadle Co. v.
Whataburger of Alice, Inc., 174 F.3d 599, 603 (5th Cir. 1999). As a result, “when
related cases are pending before two federal courts, the court in which the case was
last filed may refuse to hear it if the issues raised by the cases substantially overlap.”
Id.; accord Cherokee Nation v. Nash, 724 F. Supp. 2d 1159, 1165 (N.D. Okla. 2010).
Courts generally hold that the first-to-file rule requires analysis of three factors: “(1) the
chronology of events; (2) the similarity of the parties involved; and (3) the similarity of
the issues or claims at stake.” Wakaya Perfection, 910 F.3d at 1124 (citing Baatz v.
Columbia Gas Transmission, LLC, 814 F.3d 785, 789 (6th Cir. 2016)). However,
“simply because a court is the first to obtain jurisdiction does not necessarily mean that
it should decide the merits of the case.” Hospah Coal, 673 F.2d at 1164.
The Tenth Circuit does not appear to have directly considered the appropriate
roles of the first-filed and second-filed courts in applying the first-to-file rule. Courts
confronted with the issue have suggested that the proper course is for the second-filed
court to make the initial determination of whether the two actions substantially overlap.
See Nash, 724 F. Supp. 2d at 1166 (citing Cadle, 174 F.3d at 605). If a second-filed
court decides that question in the affirmative, it may stay the case, transfer it to the
first-filed court, or, in rare cases, dismiss the case entirely; it then falls to the first-filed
court “to determine whether subsequently filed cases involving substantially similar
issues should proceed.” Cadle, 174 F.3d at 606 (quotations omitted); see also Nash,
724 F. Supp. 2d at 1167 (“This general rule of deference includes deferring to first-filed
courts for the application of any equitable exceptions to the first-to-file rule, once the
second-filed court has determined that there is sufficient overlap between the two
cases.”). The Court finds this approach prudent and consistent with the principles of
comity and proper judicial administration. See Crocs, Inc. v. Cheng’s Enters., Inc., No.
06-cv-00605-PAB-KMT, 2015 WL 5547389 at * 3 (D. Colo. Sept. 21, 2015) (adopting
this approach and collecting cases).
Plaintiffs argue that the first-to-file rule does not favor transfer here because this
case is distinct from the Illinois lawsuit and it is more just and efficient for the Court to
rule on the pending motions in this case. See generally Docket No. 37. Defendants
argue that the chronology, similarity of parties involved, and similarity of issues point
towards transfer, and there are no equitable factors weighing against transfer. Docket
“[D]etermining the chronology of events typically requires only a comparison of
the two filing dates.” Wakaya Perfection, 910 F.3d at 1124. Plaintiffs do not dispute
that the Illinois lawsuit was filed first. See generally Docket No. 37. The Court finds
that the Illinois lawsuit was filed first and that this factor weighs in favor of transfer.
Compare Docket No. 1 (complaint filed June 18, 2020); with No. 19-cv-06771, Docket
No. 1 (complaint filed October 11, 2019).
B. Similarities of Parties
Plaintiffs argue that there is limited overlap of parties because (1) neither
Advanced Suture nor the Mark Alan Schwartz Revocable Trust Dated 12/1/2017 (the
“Trust”) are parties in the Illinois lawsuit; (2) Randa and Adom Dumanian, Dr.
Dumanian’s wife and son respectively, are plaintiffs in the Illinois lawsuit but not in this
lawsuit; and (3) the Illinois lawsuit names six defendants who are not parties in this
case. Docket No. 37 at 3. Schwartz claims that, because he and Dr. Dumanian are the
two parties with an interest in the outcome of the control dispute of Mesh Suture in the
Illinois lawsuit, and are parties to both lawsuits, the parties are substantially similar.
Docket No. 38 at 6.
The Court may place less weight on similarities of parties and claims when there
are concurrent federal cases than when one is a state case because there is no risk of
depriving a litigant of a federal forum. Wakaya Perfection, 910 F.3d at 1127 (citing
Ritchie Capital Mgmt., LLC v. BMO Harris Bank, N.A., 868 F.3d 661, 664 (8th Cir.
2017)). Additionally, the parties “need not be necessarily identical; only similarity or
substantial overlap is required.” ACU Dev., LLC v. Modern Point, LLC, No. 19-cv01063-MEH, 2019 WL 4751710, at *2 (D. Colo. Sept. 30, 2019) (quotations and citation
omitted). The addition of other defendants does not defeat substantial similarity. See
Animal Health Intern., Inc. v. Livingston Enter., Inc., No. 12-cv-00369-LTB, 2012 WL
1439243, at *3 (D. Colo. Apr. 26, 2012) (finding that reverse roles and additional
defendant in other action did not defeat substantial similarity).
Schwartz and Dr. Dumanian are parties in both cases. Dr. Dumanian purports to
bring this case on behalf of himself and Advanced Suture, but Schwartz argues that
Advanced Suture is now controlled by Schwartz. See Docket No. 1; Docket No. 19 at
3. Schwartz is the trustee of the Mark Alan Schwartz Revocable Trust Date 12/1/2017,
in whose name he purported to purchase two shares of Advanced Suture. Docket No.1
at 2, ¶ 3. Schwartz states that he and the Trust do not have conflicting interests.
Docket No. 38 at 6.
The additional plaintiffs in the Illinois lawsuit are Dr. Dumanian’s wife and son.
Docket No. 37 at 3. The additional defendants are (1) Schwartz’s wife; (2) Schwartz’s
daughter; (3) Schwartz’s son; (4) the girlfriend of Schwartz’s son; (5) Tax Lien Law
Group, LLC, which Schwartz is the sole member of; and (6) Sullion, LLC, which Dr.
Dumanian argues Schwartz is the sole member of, but which Schwartz denies being a
member of (collectively, along with Schwartz, referred to herein as the “Schwartz
parties”). No. 19-cv-06771, Docket No. 26 at 3-4, ¶¶ 5-10. The Schwartz parties filed
counterclaims against the Dumanians and a third-party complaint against Zabelle
Crosson (“Crosson”). Id., Docket No. 93 at 1.
While there are additional parties in the Illinois lawsuit, the Court finds that there
is still substantial similarity. The key players in both cases are Schwartz and Dr.
Dumanian, who are present in both cases. Dr. Dumanian and Advanced Suture are
represented by the same law firm in this case as the Dumanians in the Illinois lawsuit.1
See Nash, 724 F. Supp. 2d at 1169 (finding parties were substantially similar where
they were represented by the same counsel and there was no indication of a conflict);
see also Wallace B. Roderick Revocable Living Trust v. XTO Energy, Inc., 679 F.
Supp. 2d 1287, 1298 (D. Kan. Jan. 12, 2010) (f inding substantially similarity of parties
despite fact that one case had larger number of claimants). While Dr. Dumanian has
brought this case on behalf of himself and Advanced Suture, the control of Advanced
Suture is disputed. 2 Compare Docket No. 1 at 4, ¶ 8 (“Dr. Dumanian . . . has always
been the sole shareholder of [Advanced Suture]”); with Docket No. 19 at 3, ¶ 4 (arguing
that Schwartz is the CEO and Chairman of the Board of Advanced Suture). Advanced
Suture as a party to this case but not the Illinois lawsuit is insufficient to defeat similarity
of the plaintiffs in these actions. 3
Schwartz is representing himself and the Trust in this case, but has counsel in
the Illinois lawsuit. Schwartz’s counsel in the Illinois lawsuit is counsel for all of the
Schwartz parties. The interests of the Schwartz parties in the Illinois lawsuit are aligned
because they are represented by the same counsel, and they are substantially similar
The Dumanians have additional counsel from Akerman, LLP in the Illinois
lawsuit who is not counsel in this case.
Schwartz has also filed a notice of entry of appearance on behalf of Advanced
Suture. See Docket No. 16.
In the Illinois lawsuit, Schwartz filed a motion to intervene on behalf of Mesh
Suture, Mesh Suture HK, and Advanced Suture. No. 19-cv-06771, Docket No. 34. The
court denied it because, while the dispute over who controls the entities is pending,
neither plaintiffs nor defendants may direct any of the entities to intervene on their
behalf. Id., Docket No. 91 at 5, 7.
to defendants in this case since Schwartz is the trustee of the Trust. See Docket No. 1
at 2, ¶ 3.
This leaves Crosson, who the Schwartz parties in the Illinois lawsuit have
brought third party claims against for libel, civil conspiracy, and trespass to money and
chattels. No. 19-cv-06771, Docket No. 93 at 79, 94, 99. Crosson is represented by
different counsel from the Dumanians. See id., Docket Nos. 105, 106. However, an
additional party is not a bar to substantial similarity. See Animal Health, 2012 WL
1439243, at *3. Because Schwartz and Dr. Dumanian are the driving parties in both
lawsuits, the Court finds that there is substantial similarity of parties between this case
and the Illinois lawsuit.
C. Similarities of Claims
In the Illinois lawsuit, the Dumanians bring claims for (1) rescission of the
September 5, 2019 Board Resolutions due to econom ic duress; (2) rescission of the
September 10, 2019 settlement agreement due to economic duress; (3) declaratory
judgment regarding the parties’ rights to designate directors; (4) declaratory judgment
regarding Dr. Dumanian’s termination of Schwartz as CEO of Mesh Suture; and (5)
unjust enrichment. No. 19-cv-06771, Docket No. 16 at 20-27. The Dumanians seek
control of Mesh Suture. In this case, Dr. Dumanian brings claims for (1) securities
fraud; (2) civil theft; (3) declaratory judgment of the invalidity of Schwartz’s Advanced
Suture stock; (4) declaratory judgment of the inapplicability of the September 5, 2019
Board Resolutions to Advanced Suture; (5) in the alternative, declaratory judgment that
the September 5, 2019 Board Resolutions are invalid; (6) in the alternative, rescission
of the September 5, 2019 Board Resolutions due to duress; and (7) declaratory
judgment regarding Schwartz’s termination as CEO of Advanced Suture. No. 20-cv01800, Docket No. 1 at 21-30.
Dr. Dumanian argues that the claims in the two cases are not similar because, if
the Court finds that the September 5, 2019 Board Resolutions do not apply to
Advanced Suture, then there is no overlap with the Illinois lawsuit. See Docket No. 37
at 5-6. Dr. Dumanian states that in this case he seeks primarily to bring claims for
securities fraud, civil theft, and a declaration that the Board Resolutions do not apply to
Advanced Suture, while his claims on the invalidity of the Board Resolutions are only
asserted in the alternative. Id. at 5. Dr. Dumanian argues that “it is crucial to point out
that the only reason Plaintiffs asserted their alternative claims is because Schwartz
persists in relying on the Invalid Board Resolutions as somehow vesting him with
control over [Advanced Suture].” Id. Further, Dr. Dumanian argues that as of the filing
of the Illinois lawsuit, Schwartz had not claimed to own shares in Advanced Suture so
there was no need to discuss Advanced Suture in the Illinois lawsuit. Id. at 4.
Dr. Dumanian’s attempt to pick apart the two cases is unavailing because, as in
ACU Dev., “the issues are substantially similar in that they seek like forms of relief and
hinge on the outcome of the same legal/factual issues.” 2019 WL 4751710, at *2
(quotation marks and citation omitted). Schwartz purported to issue two shares of
Advanced Suture stock to the Trust as CEO and Chairman of the Board of Advanced
Suture. Docket No. 7-12 at 3. Schwartz argues that the Board Resolutions apply to
both Mesh Suture and Advanced Suture, while Dr. Dumanian argues that they only
apply to Mesh Suture. See Docket No. 38 at 7; Docket No. 37 at 4. The Board
Resolutions form the basis of the Illinois lawsuit. No. 19-cv-06771, Docket No. 16 at
20-27. The contested Board Resolutions state:
A meeting of the Founding Shareholders, Series A Shareholders
Representative, and Board of Directors (the “Board”') of Mesh Suture,
Incorporated, a Puerto Rico Corporation and its wholly owned subsidiary
Mesh Suture Inc (HK) Ltd., and their Affilliate [sic], Advanced Suture
Corporation (“Mesh”) (Collectively, the “Corporation”) was held on this
date by written communication.
No. 20-cv-01800, Docket No. 1-9 at 1. The Settlement Agreement states:
This MUTUAL SETTLEMENT AND RELEASE AGREEMENT (the
“Agreement”) is made and entered into as of September 10, 2019, by and
among of Mesh Suture, Incorporated, a Puerto Rico Corporation and its
wholly owned subsidiary Mesh Suture Inc (HK) Ltd., and their Affiliate,
Advanced Suture Corporation (“Mesh”) . . .
Docket No. 19-1 at 1. Dr. Dumanian argues that, while the Board Resolutions
“superficially (and sloppily) mention [Advanced Suture], [they] have nothing to do with
that company.” Docket No. 37 at 4. However, the Board Resolutions show that the two
cases hinge on the outcome of the same legal and factual issues. The facts leading up
to the signing of the Board Resolutions and settlement agreement are the same for
both this case and the Illinois lawsuit. Dr. Dumanian attempts to distinguish the facts by
arguing that this case is more concerned with Schwartz’s actions in front of the U.S.
Patent and Trademark Office, where Schwartz allegedly made improper filings that
alerted Dr. Dumanian to the fact that Schwartz had issued himself two shares of
Advanced Suture. Id. However, because the authority to issue the Advanced Suture
shares is the factual basis of this case, which Schwartz claims comes from the Board
Resolutions, see Docket No. 1 at 20, ¶¶ 82, 85, there is substantial ov erlap between the
The claims are not identical, but the same factual background of the Board
Resolutions could be determinative of both cases. The asserted theories of recovery
need not mirror each other so long as the underlying claims arise out of the same
improper actions by the defendants, which is the case here. See Chieftain Royalty Co.
v. XTO Energy, Inc., 2011 WL 1533073, at *2 (E.D. Okla. Apr. 22, 2011). T he Court
finds that both cases involve the application of the same Board Resolutions and are
thus substantially similar. Cf. Antero Res. Corp. v. S. Jersey Res. Group, LLC, No. 15cv-00656-REB-MEH, 2015 WL 13185990, at *3 (D. Colo. Oct. 22, 2015), report and
recommendation adopted, 2016 WL 8578553 (finding substantial similarity of issues
where actions arose out of the same contracts and both involved a determination of
who breached them).
D. Equitable Considerations
The Tenth Circuit has noted that equitable considerations allow a court to
disregard the first-to-file rule if it would prevent a misuse of litigation or where it would
reward forum shopping. Wakaya Perfection, 910 F.3d at 1127. In addition, the Tenth
Circuit noted that “the equitable factors bearing on state-federal concurrent litigation
may also apply so long as courts observe that state-federal concurrent litigation triggers
a different test.” Id. The test derived from Colorado River Water Conservation District
v. United States, 424 U.S. 800, 813 (1976), governs state-federal concurrent litigation
and instructs a court to consider (1) the possibility that one of the two courts has
exercised jurisdiction over property; (2) the inconvenience from litigating in the federal
forum; (3) the avoidance of piecemeal litigation; (4) the sequence in which the courts
obtained jurisdiction; (5) the “vexatious or reactive nature” of either case; (6) the
applicability of federal law; (7) the potential for the state-court action to provide an
effective remedy for the federal plaintiff; and (8) the possibility of forum shopping. Fox
v. Maulding, 16 F.3d 1079, 1082 (10th Cir. 1994). T he Court recognizes that this is a
different test than the first-to-file rule – indeed, factors two, six, and seven are irrelevant
when both cases are brought in federal court – but will examine these factors only to
consider whether any of them counsel against transferring this case to the Northern
District of Illinois.
There are no equitable factors counseling against transfer – if anything, equitable
factors weigh in favor of transfer. To transfer this case to the Northern District of Illinois
would not reward forum shopping because Dr. Dumanian chose Colorado as the forum
for this case when he could have brought it in the Northern District of Illinois.
Additionally, the Illinois lawsuit is not an anticipatory lawsuit in a preferred forum. See
Baatz, 814 F.3d at 792 (noting that an anticipatory suit (usually a declaratory judgment)
in a preferred forum is an equitable consideration that counsels against transferring the
later filed suit to the forum of the anticipatory suit). Transferring the case would not be
a misuse of litigation “in the nature of vexatious an oppressive foreign suits,” Wakaya
Perfection, 910 F.3d at 1127 (quotations marks omitted), because Schwartz consents
to the transfer and Dr. Dumanian is a citizen of Illinois. See Docket No. 38 at 10; No.
19-cv-06771, Docket No. 16 at 2, ¶ 1.
The avoidance of piecemeal litigation favors transfer because the Northern
District of Illinois will be able to resolve all of the issues in these two cases. The
Northern District of Illinois obtained jurisdiction first and there is no concern that
transferring this case would reward forum shopping. The Court finds that the other
Colorado River factors do not apply.
Dr. Dumanian argues that the Court should not transfer the case because this
District has a greater interest in resolving the issues raised. Docket No. 38 at 6.
However, the Court has considered the equitable factors the Tenth Circuit deems
appropriate to consider and finds that none of them weigh against a transfer.
Title 28 U.S.C. § 1404(a) provides in pertinent part that, “[f]or the convenience
of parties and witnesses, in the interest of justice, a district court may transfer any civil
action to any other district or division where it might have been brought.” Under 28
U.S.C. § 1391(b), a civil action may be brought in (1) a judicial district where any
defendant resides, if all defendants reside in the same State, (2) a judicial district in
which a substantial part of the events or omissions giving rise to the claim occurred, or
(3) a judicial district in which any defendant is subject to personal jurisdiction at the time
the action is commenced. Schwartz agrees that jurisdiction and venue are proper in the
Northern District of Illinois. Docket No. 38 at 1 n.1. In applying § 1404(a), the Tenth
Circuit has prescribed a number of factors for the district court to weigh. Chrysler Credit
Corp. v. Country Chrysler, Inc., 928 F.2d 1509, 1516 (10th Cir.1991). However, the
Chrysler Credit Corp. factors have little applicability in a case where transfer is under
the first-to-file rule. See Hubbard v. Argent Mortg. Co., LLC, No.
15-CV-02375-WJM-CBS, 2016 WL 4537869, at *4 (D. Colo. Aug. 31, 2016). Because
venue is proper in the Northern District of Illinois and the first-to-file rule warrants
deference to the Northern District of Illinois, the Court will transfer this case to the
Northern District of Illinois. See id. at *6 (finding that the goals of judicial economy and
consistency were better advanced by transferring, instead of staying the case).4
For the foregoing reasons, it is
ORDERED that the Clerk of Court shall transfer this case to the United States
District Court for the Northern District of Illinois. It is further
ORDERED that Plaintiffs’ Motion for Preliminary and Permanent Injunction
[Docket No. 7] is DENIED AS MOOT. It is further
ORDERED that Defendant Mark Schwartz’s Motion to Dismiss and For
Sanctions for Perjury [Docket No. 19] is DENIED AS MOOT. It is further
Because the Court will transfer this case to the Northern District of Illinois, the
Court declines to consider the pending motions and denies them as moot without
prejudice. See McNaughton v. Lowecha, LLC, 2018 WL 793789, at *11 (D.N.M. Jan.
10, 2018) (transferring case and denying as moot all pending motions).
ORDERED that this case is closed.
DATED March 31, 2021.
BY THE COURT:
PHILIP A. BRIMMER
Chief United States District Judge
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