Marks et al v. Mackey et al

Filing 16

MEMORANDUM RULING re 7 MOTION to Dismiss for Lack of Jurisdiction MOTION to Stay MOTION to Transfer Case filed by Mustang Helicopters L L C, Terry Mackey. Having found substantial overlap between the instant case and the case pending in Utah and for reasons of comity and sound judicial administration, the defendants' motion is GRANTED and the Clerk of Court is instructed to transfer this case to the USDC for the District of Utah, Central Division. This Order shall be STAYED for fou rteen days from the date of issuance. Any appeal to the District Judge must be filed within 14 days from the date of this Order. Signed by Magistrate Judge Patrick J Hanna on 7/15/2014. (crt,Alexander, E) Modified to correct file date on 7/16/2014. (Alexander, E)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE DIVISION
LLOYD MARKS and MUSTANG
HELICOPTERS, L.L.C.

CIVIL ACTION NO. 6:14-cv-00441

VERSUS

JUDGE DOHERTY

TERRY MACKEY and MUSTANG
HELICOPTERS, L.L.C.

MAGISTRATE JUDGE HANNA

MEMORANDUM RULING

Currently pending is the defendants’ motion to dismiss, stay, or transfer venue
(Rec. Doc. 7). The motion is opposed. Having reviewed the pleadings, the relevant
jurisprudence, and the applicable law, and for the reasons explained below, the
motion is granted, and this action is transferred to the United States District Court for
the District of Utah.
FACTUAL AND PROCEDURAL BACKGROUND
This is a breach of contract lawsuit. According to the plaintiffs’ complaint, two
separate entities named Mustang Helicopters, L.L.C. are parties to this lawsuit. One
of them is a limited liability company organized under the laws of the State of Utah,
while the other is a limited liability company organized under the laws of the State
of Louisiana. In order to distinguish them, the two will be referred to hereinafter as
Mustang LA and Mustang UT. Plaintiff Lloyd Marks is a citizen of Louisiana, and

he is alleged to be the sole member of Mustang LA. Defendant Terry Mackey is a
citizen of Utah. It is not known whether Mackey is a member of Mustang UT,
although it is alleged that no members of Mustang UT are Louisiana citizens and that
Mustang UT is a citizen of Utah. These allegations are sufficient for the Court to
conclude that it has subject-matter jurisdiction over the parties to this lawsuit.
In January 2012, Mackey, allegedly acting as Mustang UT’s manager, entered
into a “dry lease” agreement with Ranger Aviation, L.L.C., which is alleged to be
Marks’s business. (Rec. Doc. 1-2). Under this contract, Mustang UT leased a
helicopter and related equipment from Ranger. Mackey allegedly fell behind on the
lease payments and soon owed Ranger approximately $80,000.
In November 2012, Mackey and Mustang UT, as sellers, entered into a contract
called an Asset Purchase Agreement with Marks and Mustang LA, as buyers, for the
sale of certain assets used in the operation of Mackey’s business. (Rec. Doc. 1-3).
It is alleged that this transaction extinguished Mackey’s debt to Ranger and also
required Marks to pay the additional sum of $200,000 with an initial payment of
$40,000 and installments of $20,000 due every three months thereafter.
The Asset Purchase Agreement also allegedly required Mackey to assist Marks
in the transfer of a Part 135 Air Carrier Certificate. The plaintiffs allege, however,

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that Mackey did not endeavor to have the certificate transferred in good faith and
failed to assist Marks or others in achieving that goal.
The plaintiffs also allege that the defendants breached the terms of the Asset
Purchase Agreement because Maverick Aviation Group, L.L.C. is the owner of the
federal registered trademark “MUSTANG HELICOPTERS,” which precluded the
defendants from conveying rights to that name in breach of a material provision of
the Asset Purchase Agreement and precluded the plaintiffs from using the name.
After Maverick asserted its claim to the trademark, the plaintiffs allegedly stopped
making the payments owed under the Asset Purchase Agreement pending the
resolution of the trademark issue.
On January 9, 2014, Mackey and Mustang UT filed a lawsuit against Marks
and Mustang LA in a Utah state court, alleging breach of the Asset Purchase
Agreement. Marks and Mustang LA removed that action to the United States District
Court for the District of Utah on February 11, 2014, where it was assigned Civil
Action No. 2:14-cv-00093. Marks and Mustang LA then filed this lawsuit on
February 24, 2014.
THE PARTIES’ CONTENTIONS
In the pending motion, defendants Mackey and Mustang UT seek to have the
lawsuit pending in this forum dismissed, stayed, or transferred to another forum.
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They alternatively argue that this Court lacks personal jurisdiction over them, that the
doctrine of lis pendens mandates a stay of this action until the Utah proceeding has
been concluded, that the Western District of Louisiana is an improper venue, and that
the action should be transferred to the District of Utah or to some other forum
pursuant to 28 U.S.C. § 1404(a) and (c) and the doctrine of forum non conveniens.
Plaintiffs Marks and Mustang LA argue, however, that this action should be
maintained in this forum.
Neither the plaintiffs nor the defendants squarely addressed the first-to-file rule
in their briefing with regard to the pending motion. Accordingly, the undersigned
ordered additional briefing addressing that particular issue, and the parties complied
with that order. (Rec. Docs. 14, 15). Mackey and Mustang UT argued that the two
lawsuits substantially overlap, that the parties involved are the same, that the first-tofile rules applies, and that this action should therefore either be transferred to Utah
or dismissed.

Marks and Mustang LA argued that the two lawsuits do not

substantially overlap because the claims and rights asserted in the suits are different,
that the first-to-file rule does not apply because the Utah suit was removed to federal
court rather than originally filed there, that the first-to-file rule does not apply
because the Utah suit was filed in anticipation of the Louisiana suit, and that the
contract’s choice of law provision favors maintaining this lawsuit in Louisiana.
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ANALYSIS
The issue presented in the instant motion is whether this lawsuit should be
permitted to proceed in this forum or if it should be dismissed, stayed, or transferred
to another forum. The issue is governed by the first-to-file rule. The first-to-file rule
is a doctrine of federal comity, under which, “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.”1 “[C]omity requires federal
district courts—courts of coordinate jurisdiction and equal rank—to exercise care to
avoid interference in each other's affairs,”2 and the Fifth Circuit has “long advocated
that district courts exercise their discretion to avoid duplication of proceedings where
related claims are being litigated in different districts.”3 The outgrowth of that policy
is the first-to-file rule, a well-settled discretionary doctrine seeking “to avoid the
waste of duplication, to avoid rulings which may trench upon the authority of sister
courts, and to avoid piecemeal resolution of issues that call for a uniform result.”4

1

In re Spillman Dev. Group, Ltd., 710 F.3d 299, 307 (5th Cir. 2013) (quoting Cadle Co.
v. Whataburger of Alice, Inc., 174 F.3d 599, 603 (5th Cir. 1999)).
2

West Gulf Maritime Ass'n v. ILA Deep Sea Local 24, 751 F.2d 721, 728 (5th Cir.

3

Schauss v. Metals Depository Corp., 757 F.2d 649, 654 (5th Cir. 1985).

1985).

4

Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d at 603 (quoting West Gulf Maritime
Ass'n v. ILA Deep Sea Local 24, 751 F.2d at 729).

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The first-to-file rule determines which court may decide the merits of substantially
similar cases, and it also establishes which court decides whether the later-filed suit
must be dismissed, stayed, or transferred and consolidated.5 The first-to-file rule may
be raised by a district court sua sponte.6
Two predicate questions underlie a decision to apply the first-to-file rule: (1)
whether the two pending actions are so duplicative that they involve substantially
overlapping issues such that one court should decide both, and if so, (2) which of the
two courts should take the case.
The crucial inquiry with regard to the first question is one of substantial
overlap.7 This inquiry is satisfied if the two actions involve closely-related questions
or common subject matter. The cases need not be identical,8 and neither the parties
nor the issues presented in the cases need be identical.9 Cases substantially overlap

5

Sutter Corporation v. P&P Industries, Inc., 125 F.3d 914, 920 (5th Cir. 1997).

6

See Strukmyer, LLC v. Infinite Fin. Solutions, Inc., No. 3:13-CV-3798-L, 2013 WL
6388563, at *5 (N.D. Tex. Dec. 5, 2013); S & B Eng'rs & Constructors, Ltd. v. Alstom Power, Inc.,
No. 3:04–cv–150–L, 2004 WL 2360034, at *1 (N.D. Tex. Oct.19, 2004).
7

Int'l Fidelity Ins. Co. v. Sweet Little Mexico Corp., 665 F.3d 671, 678 (5th Cir. 2011)
(quoting Save Power Ltd. v. Syntek Finance Corp., 121 F.3d 947, 950 (5th Cir. 1997)).
8

Int'l Fidelity Ins. Co. v. Sweet Little Mexico Corp., 665 F.3d at 678; Save Power Ltd.
v. Syntek Finance Corp., 121 F.3d at 950.
9

Save Power Ltd. v. Syntek Finance Corp., 121 F.3d at 950.

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if they are “closely related”10 or if they are interrelated because the facts, witnesses,
and evidence are “inextricably intertwined.”11 Whether there is substantial overlap
is decided on a case-by-case basis,12 considering such factors as whether the core
issues are the same, or if much of the proof adduced in the two cases would likely be
identical.13 Substantial overlap has been found when separate lawsuits present the
same core facts.14
Although the first-to-file rule is discretionary15 and should be applied flexibly
rather than mechanically,16 a potential jurisdictional dispute will not prevent a court
from transferring a case under the first-to-file rule so long as there is substantial
overlap.17 Indeed, the Fifth Circuit has rejected the proposition that the first-to-file

10

West Gulf Maritime Ass'n v. ILA Deep Sea Local 24, 751 F.2d at 729

11

Pastorek v. Trail, No. 97-3040, 1997 WL 722956, at *3 (E.D. La. Nov.14, 1997).

12

Save Power Ltd. v. Syntek Finance Corp., 121 F.3d at 951.

13

Int'l Fidelity Ins. Co. v. Sweet Little Mexico Corp., 665 F.3d at 678.

14

Carter v. Nicholson, No. 07-20169, 2007 WL 3316086 at *4 (5th Cir. Nov. 8, 2007).

15

Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d at 603 (citing Kerotest Mfg. Co.
v. C–O–Two Fire Equip. Co., 342 U.S. 180, 183–84 (1952)).
16

Texas Instruments Inc. v. Micron Semiconductor, Inc., 815 F. Supp. 994, 997 (E.D.
Tex. 1993), citing Mann Mfg., Inc. v. Hortex, Inc., 439 F.2d 403, 407 (5th Cir. 1971).
17

Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d at 605.

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rule requires the court with the second-filed suit to consider whether the court with
the first-filed suit has jurisdiction.18
In this case, the same four parties – and only those four parties – are involved
in both lawsuits. They simply switch sides, the defendants in this lawsuit having
initiated the Utah action, and the plaintiffs in this suit having been sued in the Utah
action. Both lawsuits arise out of the same commercial sale transaction in which
Marks and Mustang LA purchased the assets of the Mustang UT business previously
operated by Mackey. The facts underlying the two suits are identical, and the core
issue presented in both suits is the same, i.e., whether the Asset Purchase Agreement
was breached. The same evidence will likely be presented by the same witnesses in
both actions. Although the allegations set forth in the complaints filed in the two
lawsuits are not identical, the issues raised in both actions are closely related.
Accordingly, the Court finds that the defendants have made a sufficient showing that
these two lawsuits substantially overlap.
The second inquiry is which of the two courts should take the case. With
regard to that inquiry, “[t]he Fifth Circuit adheres to the general rule that the court in

18

Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d at 604–05 (“While the likelihood
of a jurisdictional dispute in the first-filed court may be a factor to consider in applying the [first-tofile] rule, resolving the dispute in favor of that court's jurisdiction is never a condition precedent to
applying it.”)

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which an action is first filed is the appropriate court to determine whether
subsequently filed cases involving substantially similar issues should proceed.”19 The
Utah suit was initiated on January 9, 2014, with a lawsuit filed in a Utah state court.
That suit was removed to federal court in Utah on February 11, 2014. This Louisiana
federal-court suit was filed in this forum on February 24, 2014.
The plaintiffs argue that the Louisiana suit was technically the first suit filed
in a federal forum, rendering the first-to-file rule inapplicable, but that argument lacks
merit. Courts in this circuit have, on prior occasions, determined that the date of
filing in state court is the relevant benchmark for determining which suit was
first-filed.20 The Court is persuaded that this rule is appropriate; accordingly, the
Court finds that the Utah action was first-filed.
The plaintiffs also argue that the first-to-file rule does not apply because the
Utah lawsuit was filed in anticipation of litigation. The Fifth Circuit recognizes a
limited exception to the first-to-file rule for cases in which a plaintiff files suit for

19

Save Power Ltd. v. Syntek Finance Corp., 121 F.3d at 950.

20

Bank of Am. v. Berringer Harvard Lake Tahoe, No. 3:13-CV-0585-G, 2013 WL
2627085, at * 3 (N.D. Tex. June 12, 2013); Poche v. Geo–Ram, Inc., No. 96–1437, 1996 WL
371679, at *2 (E.D.La. July 2, 1996); Igloo Products Corporation v. The Mounties, Inc., 735 F.Supp.
214, 217 (S.D.Tex.1990) (citing Federal Deposit Insurance Corporation v. Taylor, 727 F.Supp. 326,
329 (S.D.Tex.1989)).

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declaratory relief in anticipation of a lawsuit to be filed by the defendant.21 Such
anticipatory lawsuits are disfavored as a type of forum shopping.22 “[T]he primary
reason courts have recognized the anticipatory suit exception to the first-to-file rule
is to avoid penalizing a party that has attempted to settle a dispute out of court.”23 In
this case, however, the plaintiffs explain that the efforts of all parties to amicably
resolve the dispute presented in both lawsuits ended on December 20, 2013, when
counsel for Mustang UT and Mustang LA received proof from Maverick that
Maverick owned rights in the name “Mustang Helicopters.” (Rec. Doc. 15 at 4-5).
Both Mustang UT and Mustang LA prepared and filed breach-of-contract lawsuits,
but Mustang UT filed its suit first. There is no indication that the first-filed Utah suit
was motivated by an attempt to inequitably gain precedence in time, to change
forums, or to gain an advantage presented by one forum over another.24 “Merely
filing a declaratory judgment action in a federal court with jurisdiction to hear it, in

21

See Pac. Employers Ins. Co. v. MV/Capt. W .D. Cargill, 751 F.2d 801, 804 (5th Cir.

22

Mission Ins. Co. v. Puritan Fashions Corp., 706 F.2d 599, 602, n. 3 (5th Cir. 1983).

1985).

23

Twin City Ins. Co. v. Key Energy Servs., Inc., No. CIV A H-09-0352, 2009 WL
1544255, at *5 (S.D. Tex. June 2, 2009)
24

See St. Paul Ins. Co. v. Trejo, 39 F.3d 585, 590-91 (5th Cir. 1994).

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anticipation of state court litigation, is not in itself improper anticipatory litigation or
otherwise abusive ‘forum shopping.’”25
Furthermore, as noted, the jurisprudence regarding forum shopping focuses on
declaratory judgment actions. The Utah suit, however, is a not a declaratory
judgment action; it is a suit seeking specific performance of the contract as well as
damages for breach of the contract, breach of guaranty, unjust enrichment,
detrimental reliance, and estoppel. “The reasoning underlying [the anticipatory suit
exception to the first-to-file rule] is that anticipatory filing in order to avoid litigation
by the defendant deprives the ‘true plaintiff' of his right to select the proper forum.”26
No such deprivation occurred here, since the plaintiffs in the Utah litigation do not
appear to be seeking circumvention of claims that might be asserted by the adverse
parties in another forum but appear, instead, to be asserting valid claims of their own.
Therefore, there is no evidence of forum shopping that would trigger the anticipatorysuit exception and preclude operation of the first-to-file rule. While the plaintiffs in
the Utah litigation may well have filed suit in anticipation of the plaintiffs in this
action filing a lawsuit in Louisiana, they did not merely file a declaratory judgment
action to fix venue in advance of the plaintiffs’ filing their own lawsuit. Instead, after

25

Sherwin–Williams Co. v. Holmes Cty., 343 F.3d 383, 391 (5th Cir. 2003).

26

Strukmyer, LLC v. Infinite Fin. Solutions, Inc., 2013 WL 6388563, at *7.

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learning that Maverick had a right to the name “Mustang Helicopters,” the Utah
plaintiffs filed suit alleging various substantive causes of action. The undersigned
concludes that these are not the circumstances in which the anticipatory-suit
exception should be applied, particularly by the court with the later-filed case.27
The plaintiffs also suggest that the choice of law provision in the parties’
contract, which indicates that Louisiana law is to be used in resolving disputes, means
that the “case would be most advantageously heard in the Western District of
Louisiana.” (Rec. Doc. 15 at 3). But the issue before the Court is not which court
presents the most convenient forum but which court should decide whether the laterfiled suit must be dismissed, stayed, or transferred and consolidated. The Utah court
is capable of determining which state's choice of law rule applies and of applying
Louisiana law to legal issues that arise if it determines that such a choice of law is
appropriate,28 and the presence of a choice-of-law provision in the disputed contract
does not render the first-to-file rule inapplicable.
“The first-to-file rule holds that ‘[i]n the absence of compelling circumstances,
the Court initially seized of a controversy should be the one to decide whether it will

27

See Strukmyer, LLC v. Infinite Fin. Solutions, Inc., 2013 WL 6388563, at *7.

28

See Needbasedapps, LLC v. Robbins, 926 F. Supp. 2d 919, 934 (W.D. Tex. 2013).

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try the case.’”29 In this case, the plaintiffs have not demonstrated that “compelling
circumstances” exist, requiring the first-to-file rule to be disregarded. Compelling
circumstances have been found to exist when a party engages in bad faith conduct by
inducing an opposing party to delay filing of a lawsuit so that he could file a
preemptive lawsuit.30 But there is no evidence that the plaintiffs in the Utah litigation
took any action that induced the plaintiffs in this action to delay filing their lawsuit.
Neither the fact that the Utah lawsuit was originally filed in state court, nor the fact
that the Utah suit was filed in anticipation of this suit, nor the fact that the disputed
contract contains a choice-of-law provision creates circumstances so compelling that
the first-to-file rule should be disregarded.
Absent such compelling circumstances, “[o]nce the likelihood of a substantial
overlap between the two suits ha[s] been demonstrated, it [is] . . . no longer up to the
[second filed court] to resolve the question of whether both should be allowed to
proceed.”31 Instead, the proper course of action for the second-filed court is “to
transfer the case to the [first-filed] court to determine which case should, in the

29

Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 961 F.2d 1148, 1161, n. 28

th

(5 Cir. 1992).
30

Chapa v. Mitchell, No. A–05–CV–769–JN, 2005 WL 2978396, at *2 (W.D.Tex.

Nov.4, 2005).
31

Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d at 605 (quoting Mann Mfg., Inc.
v. Hortex, Inc., 439 F.2d at 407).

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interests of sound judicial administration and judicial economy, proceed.”32 Having
found that the two lawsuits are closely related and present issues that substantially
overlap, the proper course of action is for this Court to transfer this case to the Utah
court to determine which action should, in the interests of sound judicial
administration and judicial economy, proceed.33
The Court pretermits any further discussion of whether this Court lacks
personal jurisdiction over the defendants, whether the doctrine of lis pendens
mandates a stay of this action until the Utah proceeding has been concluded, whether
the Western District of Louisiana is an improper venue, and whether this action
should be transferred to the District of Utah or to some other forum pursuant to 28
U.S.C. § 1404(a) and (c) and the doctrine of forum non conveniens.
CONCLUSION
Having found substantial overlap between the instant case and the case pending
in Utah and for reasons of comity and sound judicial administration, the defendants’
motion (Rec. Doc. 7) is GRANTED and the Clerk of Court is instructed to transfer
this case to the United States District Court for the District of Utah, Central Division.

32

Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d at 606.

33

Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d at 606.

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This Order shall be STAYED for fourteen days from the date of issuance. Any
appeal to the District Judge must be filed within fourteen days from the date of this
Order. If an appeal is taken to the District Judge, this Order shall remain stayed until
the appeal is decided. If no timely appeal is filed, the clerk shall transfer the action
forthwith.
Signed at Lafayette, Louisiana on July 15, 2014.

____________________________________
PATRICK J. HANNA
UNITED STATES MAGISTRATE JUDGE
COPY SENT:
DATE: _________________
7/16/2014
BY:
EFA
TO: ____________________
RFD
cg

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