Holley Performance Products, Inc. v. Tucows, Inc. et al
Filing
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MEMORANDUM OPINION AND ORDER denying 18 Defendants' Motion to Dismiss or, in the alternative, Motion to Stay Case. Signed by Chief Judge Thomas B. Russell on 4/12/2011. cc: Counsel (CDF)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
BOWLING GREEN DIVISION
CASE NO. 1:10-CV-180
HOLLEY PERFORMANCE PRODUCTS, INC.
PLAINTIFF
v.
TUCOWS, INC., and TUCOWS.COM CO.
DEFENDANTS
MEMORANDUM OPINION AND ORDER
This matter is before the Court upon Defendants’ Motion to Dismiss or, in the
Alternative, to Stay Case (Docket #18). Plaintiff has responded (Docket #23). Defendants have
replied (Docket #26). This matter is now ripe for adjudication. For the following reasons,
Defendants’ motion is DENIED.
BACKGROUND
This case involves an ongoing dispute regarding the domain name . The
parties have initiated actions in three forums: the Ontario Superior Court of Justice (the “Ontario
proceeding”), the National Arbitration Forum under the Uniform Domain Name Dispute
Resolution Policy (“UDRP action”), and this Court. The UDRP action was filed on June 30,
2010, and the Ontario proceeding commenced on July 8, 2010. The National Arbitration Forum
issued a decision on August 19, 2010, dismissing Holley Performance Products, Inc.’s
(“Holley”) complaint without prejudice because it had discretion to do so if a legal proceeding
was pending at the same time. In the Ontario proceeding, Tucows.com Co. (“Tucows.com”)
seeks a declaratory judgment “that Tucows has legitimate rights to the domain
name, that it was not registered or being used in bad faith, and that Plaintiff was not entitled to a
transfer of the domain name.” Def.’s Mem., DN 18-1, p. 2. Holley was served on November 2,
2010.
Holley filed the present lawsuit against Tucows.com and Tucows, Inc., on December 13,
2010. Holley’s Complaint seeks damages for cybersquatting under 15 U.S.C. § 1125(d),
trademark infringement under 15 U.S.C. § 1114(1), false designation of origin and unfair
competition under 15 U.S.C. § 1125(1), unjust enrichment, and common law unfair competition.
See Compl., DN 1, ¶¶ 50-81. Tucows.com and Tucows, Inc., filed the present motion to dismiss
on February 15, 2011. They claim that this lawsuit is duplicative of the Ontario proceeding and
should be dismissed or stayed according to the doctrine of abstention.1 The Court now considers
this motion.
DISCUSSION
Defendants ask this Court to abstain from exercising jurisdiction in light of the doctrine
of international abstention, an extension of the state court abstention doctrine of Colorado River
Water Conservation Dist. v. United States, 424 U.S. 800 (1976). See, e.g., Finova Capital Corp.
v. Ryan Helicopters U.S.A., Inc., 180 F.3d 896, 898 (7th Cir. 1999) (“[I]n the interests of
international comity, we apply the same general principles with respect to parallel proceedings in
a foreign court.”); Groeneveld Transp. Efficiency, Inc. v. Eisses, No. 1:07 CV 1298, 2007 WL
2769595, at *1 (N.D. Ohio Sept. 18, 2007).
In Colorado River, the Supreme Court held that a federal court may abstain from
exercising jurisdiction because a similar state court proceeding is pending. See 424 U.S. at 817.
The Supreme Court first noted that “[g]enerally, as between state and federal courts, the rule is
1
Holley is a Delaware corporation whose principal place of business is in Bowling Green,
Kentucky. Compl., DN 1, ¶ 1. Tucows.com is a wholly-owned subsidiary of Tucows
(Delaware) Inc., which is a wholly-owned subsidiary of Tucows, Inc. Compl., DN 1, ¶ 3.
Tucows, Inc., is a Pennsylvania corporation with its principal office in Toronto, Canada.
Compl., DN 1, ¶ 2.
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that ‘the pendency of an action in the state court is no bar to proceedings concerning the same
matter in the Federal court having jurisdiction . . . .’” Id. A narrow exception exists, however, in
circumstances where “wise judicial administration” principles govern. See id. “[T]he
circumstances permitting the dismissal of a federal suit due to the presence of a concurrent state
proceeding for reasons of wise judicial administration are considerably more limited than the
circumstances appropriate for [other forms of] abstention. The former circumstances, though
exceptional, do nevertheless exist.” Id. at 818.
This principle has been recognized by the Supreme Court of the United States and the
Sixth Circuit finding that, “despite the ‘virtually unflagging obligation of the federal courts to
exercise the jurisdiction given them,’ considerations of judicial economy and federal-state
comity may justify abstention in situations involving the contemporaneous exercise of
jurisdiction by state and federal courts.” Romine v. Compuserve Corp., 160 F.3d 337, 339 (6th
Cir. 1998) (internal citation omitted) (quoting Colorado River, 424 U.S. at 817).
There are two basic steps that must be completed by the district court in determining
whether Colorado River abstention is applicable. First, the district court must determine if the
concurrent foreign and federal cases are parallel. Romine, 160 F.3d at 339. “Exact parallelism is
not required; it is enough if the two proceedings are substantially similar.” Id. at 340 (internal
citations and quotations omitted). In Romine, the Sixth Circuit held the cases were parallel
where the parties were substantially similar, although not identical, and the claims against the
defendants were “predicated on the same allegations as to the same material facts . . . .” Id.; see
also Equitable Gathering, LLC v. Caudill, No. 7:08-216-KKC, 2009 WL 2922859 (E.D. Ky.
Sept. 10, 2009) (holding the cases parallel when parties were substantially similar, although
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differing, and the case arose from the same set of facts); Bell v. Countrywide Home Loans, Inc.,
No. 5:08-cv-167-JHM, 2009 WL 260805 (W.D. Ky. Feb. 4, 2009) (holding cases parallel when
the parties, claims and issues were substantially similar; “[plaintiffs] attempt to distinguish the
instant case by adding different defendants and recasting his claims using additional legal
theories is unavailing”); Progressive Cas. Ins. Co. v. Franklin, No. 1:05cv-65-M, 2005 WL
1935675 (W.D. Ky. Aug. 8, 2005) (holding cases parallel if the parties are substantially similar
and the claims arise from the same material facts; found cases parallel where the substance of the
claims were identical in both cases).
Cases are not considered parallel, however, if there is an issue that would not be resolved
by the foreign court upon the completion of the foreign court action. See E.ON U.S. Servs., Inc.
v. QSC Painting, Inc., No. 08-54-JBC, 2008 WL 3982499 (E.D. Ky. Aug. 26, 2008) (finding the
cases were not parallel where the central issue in the federal case will need to be decided
regardless of the outcome of the state court case); PNC Bank, Nat’l Assoc. v. Person, No. 06292-C, 2007 WL 1423744 (W.D. Ky. May 8, 2007) (holding cases not parallel where resolution
of the state court case will not clearly dispose of all the claims presented in the federal case).
“The issue is not . . . whether the proceedings could be modified to make them parallel; the issue
is whether the [foreign] court proceeding, as it currently exists, is a parallel [foreign]-court
proceeding.” PNC Bank, 2007 WL 1423744, at *3 (citing Baskin v. Bath Twp. Bd. Of Zoning
Appeals, 15 F.3d 569, 572 (6th Cir. 1994)) (emphasis in original).
If they are parallel, then the district court must apply the multi-factor balancing test set
forth initially in Colorado River and expanded by later case law. Romine, 160 F.3d at 340-41.
This balancing test includes such factors as
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(1) whether the [foreign] court has assumed jurisdiction over any res or property;
(2) whether the federal forum is less convenient to the parties; (3) avoidance of
piecemeal litigation; . . . (4) the order in which jurisdiction was obtained. . . . (5)
whether the source of governing law is [foreign] or federal; (6) the adequacy of
the [foreign] court action to protect the federal plaintiff’s rights; (7) the relative
progress of the [foreign] and federal proceedings; and (8) the presence or absence
of concurrent jurisdiction.
Id. (internal citations omitted). “No one factor is necessarily determinative; a carefully
considered judgment taking into account both the obligation to exercise jurisdiction and the
combination of factors counseling against that exercise is required. Only the clearest of
justifications will warrant dismissal.” Colorado River, 424 U.S. at 818-19 (internal citations
omitted). In other words,
the decision whether to dismiss a federal action because of parallel [foreign]-court
litigation does not rest on a mechanical checklist, but on a careful balancing of the
important factors as they apply in a given case, with the balance heavily weighted
in favor of the exercise of jurisdiction. The weight to be given to any one factor
may vary greatly from case to case, depending on the particular setting of the
case.
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16 (1983).
I.
Are the Concurrent Federal and Foreign Cases Parallel?
The Court must first determine if the proceedings at issue are sufficiently parallel. Both
parties acknowledge, for purposes of this motion, that the proceedings are parallel under the
Colorado River abstention doctrine. The Court agrees.
First, the parties in both actions are substantially similar. The Ontario proceeding is a
suit brought by Tucows.com against Holley. In this case, there is only one additional party:
Tucows, Inc., which is the holding company of Tucows (Delaware), Inc., which in turn owns
Tucows.com. In light of the relationship between the Defendant entities in this case, the Court
finds that the parties are substantially similar.
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In addition, both cases concern the same set of material facts. Both cases involve a
dispute over the domain name . In this case, Holley alleges that Tucows.com and
Tucows, Inc., violated cybersquatting, trademark, and unfair competition laws, and seeks
damages, injunctive relief, and an order transferring the infringing domain to
Holley. In the Ontario proceeding, Tucows.com seeks a declaration of its rights as to
, including a declaration that the domain name has not been registered, that
Tucows.com has not used the domain name in bad faith, and that Holley is not entitled to a
transfer of the name. Tucows.com also specifically argues in the Ontario proceeding that
is not used in an infringing manner to any trademark. Essentially, the parties have
asserted their claims over the domain name in two different forums. Thus, the
resolution of one case will dispose of the claims in the other case.
II.
Application of the Colorado River Multi-Factor Balancing Test
Because the Court has determined that the concurrent federal and foreign cases are
parallel, the Court now applies the multi-factor balancing test set forth in Colorado River and its
progeny. The district court’s application of this balancing test is flexible and varies depending
on the circumstances of the case, although the balance is always heavily weighed in favor of the
exercise of jurisdiction. Colorado River, 424 U.S. at 818-19; Moses H. Cone Memorial Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 16 (1983).
A.
Assumed Jurisdiction over Res or Property
Defendants argue that the first factor, whether the foreign court has assumed jurisdiction
over any res or property, weighs in favor of abstention. In support of this argument, Defendants
assert that the core issue in these proceedings is the disposition of a property right, that is, the
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domain name. The situs of this domain name is in Ontario, where the domain name
is registered with Tucows, Inc. In contrast, Plaintiff argues that the first factor weighs against
abstention because neither court has jurisdiction over any res or property.
While the Court agrees with Defendants that the domain name is property,
see 15 U.S.C. § 1125(d)(2)(A) (permitting the filing of an in rem civil action against a domain
name), there is no evidence that the foreign court in this case has assumed jurisdiction over such
property.2 The Ontario proceeding is not an in rem action, but rather a declaratory judgment
action. Thus, this favor weighs against abstention.
B.
Inconvenience of the Federal Forum
The second factor looks to the convenience of the federal forum. Defendants argue that
Plaintiff has failed to present a meaningful connection between the federal forum and
Tucows.com or the events giving rise to Plaintiff’s claims. In contrast, Defendants note that the
events giving rise to Plaintiff’s allegations are in fact connected to Tucows principal office in
Ontario. Plaintiff asserts that this factor is neutral because the federal forum is more convenient
for Holley but the Ontario forum is more convenient for Tucows. Plaintiff notes that these
proceedings will revolve around Holley’s trademarks and such evidence would be located at or
nearby Holley’s principal office in Kentucky.
The Court finds that this factor is neutral or weighs slightly against abstention. As
Plaintiff has noted, one forum is clearly more convenient for one party while the other obviously
2
An in rem civil action under 15 U.S.C. § 1125(d) is only permitted if a plaintiff is
“unable to obtain in personam jurisdiction or through due diligence not [ ] able to find a person
who would have been a defendant under paragraph (1) of § 1125(d).” Heathmount A.E. Corp. v.
Technodome.com, No. CA-00-00714-A, 2000 WL 33666935, at *2 (E.D. Va. Dec. 29, 2000)
(citing 15 U.S.C. § 1125(d)(2)(A)(ii)).
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favors the other party. In addition, this case is unlike those cases which have found a federal
forum inconvenient due to the location of the parties, witnesses, and evidence, as the evidence in
this case appears to be connected to both locations. Cf. Groeneveld, 2007 WL 2769595, at *2
(noting that the Ontario forum was more convenient because the defendant, who was sued for
breach of fiduciary duties, resided in Ontario and performed his duties there).
C.
Need to Avoid Piecemeal Litigation
The Court finds that the third factor, avoidance of piecemeal litigation, weighs heavily in
favor of abstention. “Piecemeal litigation occurs when different courts adjudicate an identical
issue, thereby duplicating judicial effort and potentially rendering conflicting results.” Romine,
160 F.3d at 341 (citing LaDuke v. Burlington Northern R.R. Co., 879 F.2d 1556, 1560 (7th Cir.
1989)). As explained, the issues to be decided by the foreign court and this Court are largely
identical. Both courts are asked to decide trademark issues, the ownership rights of ,
and the issue of bad faith. There is significant risk of piecemeal litigation in this case; therefore
this factor weights heavily in favor of abstention.
D.
Order in Which Jurisdiction was Obtained
The fourth factor to be considered is the order in which jurisdiction was obtained by the
foreign and federal courts. This factor is closely tied with the relative progress of the foreign
court case: “priority should not be measured exclusively by which complaint was filed first, but
rather in terms of how much progress has been made in the two actions.” Moses H. Cone
Memorial Hosp., 460 U.S. at 21. As noted previously, jurisdiction was obtained in the Ontario
proceeding on July 8, 2010. Plaintiff points out, however, that it was not served until November
2, 2010. This action was commenced on December 13, 2010, and Defendants filed the present
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motion to dismiss on February 15, 2011. Both cases remain in their early stages. Plaintiff
asserts that the only development thus far in the Ontario proceeding is Holley’s pending motion
to dismiss for lack of jurisdiction or, in the alternative, to stay that litigation until a judgment is
reached in this Court. In fact, Plaintiff has presented evidence that the Ontario proceeding is set
to hold a hearing on that motion on October 3, 2011. Thus, both courts are tackling substantially
similar issues at this time, and it is likely that this Court will resolve the issue before the Ontario
court reaches its decision. Accordingly, the Court finds that this factor weighs against
abstention.
E.
Whether Federal or Foreign Law Governs
Next, the Court considers whether federal or foreign law governs these parallel
proceedings. Plaintiff’s Complaint clearly asserts claims arising under the Lanham (Trademark)
Act and the Anti-Cybersquatting Consumer Protection Act (“ACPA”). See 15 U.S.C. §§
1114(1), 1125(d). Plaintiff also asserts claims under Kentucky common law. This matter
concerns several trademarks, trade names and logos registered with the United States Patent and
Trademark Office. In contrast, there is no indication that foreign law governs this case.
Accordingly, this factor weighs against abstention.
F.
Protection of the Federal Plaintiff’s Rights
The sixth factor addresses the adequacy of the foreign court action to protect Holley’s
rights. While the Court certainly acknowledges that Ontario courts are able to protect the
interests of federal plaintiffs generally, this action is heavily grounded in United States federal
law. This Court is more familiar with these trademark laws and “Plaintiff may not be able to
assert the same rights in Canada, which lacks a body of law equivalent to the ACPA and whose
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enforcement of its trademark laws cannot extend into the United States.” Heathmount A.E.
Corp. v. Technodome.com, No. CA-00-00714-A, 2000 WL 33666935, at *7 (E.D. Va. Dec. 29,
2000). The Court finds that this factor weighs against abstention.
G.
Relative Progress of the Proceedings
The Court has already discussed the seventh factor in conjunction with the fourth factor,
noting that both courts are currently in substantially similar positions. In addition, the Ontario
court is unlikely to rule on the issue of forum non conveniens until October of this year. Thus,
like the fourth factor, this factor also weighs against abstention.
H.
Presence or Absence of Concurrent Jurisdiction
The eighth and final factor, the presence of concurrent jurisdiction, is neutral. The
parties are challenging the jurisdiction of both courts. In addition, neither party addresses this
factor in great detail in their briefing. Nor does the Court believe this factor plays a large role in
this analysis.
In conclusion, the balance of the relevant factors weighs against abstention. The only
factor that weighs in favor of abstention is the third factor, or the need to avoid piecemeal
litigation. Certainly this is a concern for the Court and represents the most important factor in
the Court’s consideration. See Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S.
1, 16 (1983). The balance of the remaining factors, however, overcomes the third factor. Both
proceedings are in the early stages of litigation and Plaintiff’s Complaint concerns significant
matters of federal law. For these reasons, the Court concludes that it should retain jurisdiction
over this case. See id. (“[T]he decision whether to dismiss a federal action because of parallel
state-court litigation does not rest on a mechanical checklist, but on a careful balancing of the
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important factors as they apply in a given case, with the balance heavily weighted in favor of the
exercise of jurisdiction.” (emphasis added)). The Court also notes that the Ontario Superior
Court of Justice may grant Holley’s forum non conveniens motion. Thus, staying this matter for
purposes of awaiting a decision in Ontario may only serve to delay these proceedings further.
Because these parallel actions are both in their early stages, this Court sees no harm in
proceeding with discovery at this time.
CONCLUSION
For the foregoing reasons, IT IS HEREBY ORDERED that Defendants’ Motion to
Dismiss or, in the Alternative, to Stay Case is DENIED.
April 12, 2011
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