G.S. Robins & Company v. Alexander Chemical Corporation
Filing
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MEMORANDUM AND ORDER - IT IS HEREBY ORDERED that the defendant's motion to dismiss, or in the alternative, to transfer to the Northern District of Illinois 6 be and is GRANTED IN PART and DENIED IN PART. This case shall be TRANSFERRED to the U nited States District Court for the Northern District of Illinois. That part of the motion requesting dismissal of this case is denied without prejudice pending transfer of the case to the Northern District of Illinois. IT IS FINALLY ORDERED that the Clerk of the Court shall transfer this cause of action to the United States District Court for the Northern District of Illinois pursuant to 28 U.S.C. §1404(a). Signed by Honorable Stephen N. Limbaugh, Jr on 4/14/11. (LAH)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
G.S. ROBINS & CO.,
Plaintiff,
vs.
ALEXANDER CHEMICAL CORP.,
Defendant.
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Case No. 4:10CV2245SNLJ
MEMORANDUM AND ORDER
Plaintiff filed this declaratory judgment action originally in the Associate Circuit Court for
the City of St. Louis. On or about December 2, 2010 defendant removed this case to federal
court on the basis of diversity jurisdiction. This matter is before the Court on the defendant’s
motion to dismiss, or in the alternative, to transfer this cause of action to the Northern District of
Illinois [6], filed December 7, 2010. Responsive pleadings have now all been filed and the matter
is ripe for disposition.
This dispute involves a controversy over obligations concerning certain chemical product
cylinder containers that were used to deliver chemical products purchased by plaintiff from
defendant over a thirty (30) year period. The question before this Court is whether to try this
case here or whether it should be tried in the Northern District of Illinois. Plaintiff, who filed this
declaratory judgment action in Missouri before the defendant filed its multicount contract and tort
action in Illinois, argues that the “first to file” rule should apply. Defendant disagrees. After
careful consideration of the matter, review of the parties’ pleadings and submitted exhibits, and
relevant caselaw, the Court will not apply the “first to file” rule and will transfer this case to the
Northern District of Illinois.
The Declaratory Judgment Act grants the district court the discretion to hear, stay or
dismiss a declaratory judgment action brought before it. 28 U.S.C. §2201.1 The Declaratory
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Although plaintiff brought this action under Missouri’s declaratory judgment act,
§527.010 et. seq., upon removal, this action became governed by the federal Declaratory
Judgment Act, 28 U.S.C. §2201.
Judgment Act (DJA), states in pertinent part, that “any court of the United States, upon filing of
an appropriate pleading, may declare the rights and other legal relations of any interested party
seeking such declaration.” 28 U.S.C. §2201(a). The DJA was “intended to provide a remedy
which would `minimize the danger of avoidable loss and the unnecessary accrual of damages and
to afford one threatened with liability an early adjudication without waiting until his adversary
should see fit to begin an action after the damage has accrued.’” Eveready Battery Co., Inc. v.
L.P.I. Consumer Products, Inc., 464 F.Supp.2d. 887, 890 (E.D.Mo. 2006) quoting Koch
Engineering Co. v. Monsanto Co., 621 F.Supp. 1204, 1206-07 (E.D.Mo. 1985)(quoting 10A
C.Wright, A. Miller and M. Kane, Federal Practice and Procedure §2751 at 569 (1983)).
The plaintiff argues that the Court should retain its DJA action because priority should be
given to applying the first-to-file rule. It further argues that the defendant has failed to meet the
standard for a Rule 12(b)(6) dismissal and/or there are no compelling reasons to transfer this case
to the Northern District of Illinois. Finally, it argues that it only sought a declaration that
Missouri’s five-year statute of limitations precludes any contract or tort action by the defendant
regarding payments for non-returned/lost cylinders and that defendant, in fact, owes the plaintiff a
small sum for deposits paid on said cylinders, after defendant had “threatened” it with legal action.
Defendant, on the other hand, contends that the first-to-file rule should not be applied in this case
because plaintiff filed its DJA action in a bad faith attempt at forum-shopping during settlement
negotiations in anticipation of litigation. It further contends that this case does not fulfill the
requirements of a declaratory judgment action in that there are not damages accruing; i.e. all
damages have accrued and are ascertainable. It seeks dismissal or transfer pursuant to 28 U.S.C.
§2201.
In instances wherein parallel litigation has been instituted by the same or different parties
in different courts, the “first-filed rule” gives priority to choice of venue of the party who first
established jurisdiction. Northwest Airlines v. American Airlines, 989 F.2d. 1002, 1004-1006
(8th Cir. 1993)(internal citations omitted); see, Keymer v. Management Recruiters Intel., 169
F.3d. 501, 503 n.2 (8th Cir. 1999) citing Northwest Airlines, supra.; Anheuser-Busch, Inc. v.
Supreme Intel. Corp., 167 F.3d. 417, 419 n.3 (8th Cir. 1999) citing Northwest Airlines, supra.;
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Monsanto Technology LLC v. Syngenta Crop Protection, Inc., 212 F.Supp.2d. 1102-03
(E.D.Mo. 2002) citing Northwest Airlines, supra.; General Committee of Adjustment GO-386 et.
al. v. Burlington Northern Railroad, 895 F.Supp. 249, 251-52 (E.D.Mo. 1995). The purpose of
the rule is to conserve judicial resources and avoid conflicting rulings; however, the rule should
not be applied in a rigid, mechanical or inflexible manner but rather should serve as a means to
facilitate the interests of justice. Id. The prevailing standard is that in the absence of “compelling
circumstances”, the first-filed rule should apply. Boatmen’s First National Bank of Kansas City v.
Kansas Public Employees Retirement System, 57 F.3d. 638, 641 (8th Cir. 1995) citing Northwest
Airlines, supra.; Monsanto Technology, at 1102-03; Eveready Battery Co. v. Zinc Products Co.,
21 F.Supp.2d. 1060, 1061-62 (E.D.Mo. 1998); Commercial Union Ins. v. Torbaty, 955 F.Supp.
1162, 1163 (E.D.Mo. 1997); General Committee of Adjustment GO-386, at 251-52 (citations
omitted).
The Eighth Circuit has identified “two red flags” that indicate the presence of compelling
circumstances justifying the non-application of the first-filed rule. Firstly, whether the “first”
lawsuit was filed after the other party gave notice of its intention to sue; and secondly, whether
the “first” action was for declaratory relief rather than for damages or equitable relief. Northwest
Airlines, at 1007; see, Anheuser-Busch, Inc. v. Supreme Intel. Corp., at 419; Boatmen’s First
National Bank of Kansas City, at 641; Eveready Battery v. Zinc Products, at 1062; Commercial
Union Ins., at 1163.
Finally, the cases do not have to be identical as to parties and/or issues, but must be
related that there is substantial overlap between the cases regarding the issues raised. Monsanto
Technology, at 1103; General Committee of Adjustment GO-386, at 252.
Contrary to the plaintiff’s assertions, defendant is not seeking a dismissal pursuant to Rule
12(b)(6) Fed.R.Civ.P. or seeking summary judgment by presenting matters outside the pleadings.
Defendant is clearly seeking dismissal or transfer pursuant to this Court’s inherent discretionary
powers to do so under the DJA. Thus, the Court will examine this case under the auspices of a
DJA transfer or dismissal.
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Upon examination of the facts of this case as presented by the parties, the Court believes
that the “red flags” set forth by the Eighth Circuit are present here. In March 2010, defendant
sent a letter to plaintiff clearly stating its belief that plaintiff was obligated to return or replace the
subject cylinders. Defendant offered to wait until September 1, 2010 for plaintiff to locate and
return any missing cylinders and to “settle up” any shortfalls in returned cylinders. In August
2010, defendant again contacted the plaintiff requesting a meeting to discuss the missing cylinder
situation. Plaintiff responded positively to the meeting and suggested that a meeting be arranged
in late August or September 2010. Emails were exchanged, and a meeting date of September 8,
2010 was agreed upon. On or about September 2, plaintiff cancelled the meeting scheduled for
September 8, 2010. Defendant emailed plaintiff expressing displeasure at the meeting being
cancelled, its hopes that “a couple of business men can resolve issues more efficiently and
effectively than the lawyers can”, and requesting plaintiff’s position letter.2 On September 15,
2010 defendant received a letter from plaintiff’s attorney requesting documentation regarding the
subject cylinders. That same day, defendant responded in telling plaintiff that this information had
been provided previously on several occasions and that defendant believed that the repeated
requests for information (already provided) were “tactics to further delay the resolution or the
return of the assets of Alexander Chemical that either are in your possession or have been lost.”.
On or about October 5, 2010 defendant sent a letter to plaintiff expressing its frustrations
at getting the cylinder dispute settled. In this letter, defendant stated that “[I]f within 15 days
from the date of this letter, Alexander is not either in receipt of the amount of $768,155, or all of
the cylinders in question, we will be forced to file the necessary cause of action to enforce our
rights.” Exhibit 7 to Leavitt Affidavit. On or about October 18, 2010, in response to defendant’s
October 5th letter, plaintiff contacted defendant about the possibility of still negotiating a
settlement of the cylinder dispute and offering to meet with defendant in Chicago on October 25,
27 or 28. Exhibit 8 to Leavitt Affidavit. Pursuant to a telephone communication, the parties
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Plaintiff contends that the September 8th meeting was cancelled by mutual agreement;
however, it offers no support for this contention. However, the affidavit of Gillman Leavitt,
President of defendant Alexander Chemical Corp. and the email sent belie this contention.
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agreed to meet on November 1, 2010 in defendant’s Downer Grove, Illinois office to discuss
settlement of the cylinder dispute.
Meanwhile, on or about October 27, 2010, plaintiff completed its own accounting and
determined that it did not owe defendant any monies but instead defendant owed plaintiff a small
sum of money. It further decided that the Missouri statute of limitations was applicable. Having
made these determinations, plaintiff “realized that Alexander would not agree with its position,
and that, given the vast disparity between the positions of the parties, settlement discussions were
not likely to be fruitful.” Plaintiff’s Response [14], pg. 3. Plaintiff filed its state declaratory
action on October 28, 2010. On October 29, 2010 plaintiff contacted the defendant to cancel the
November 1st meeting without disclosing the filing of the state court action. On or about
November 3, 2010 defendant was served with plaintiff’s state court complaint.
On or about December 2, 2010 defendant filed its multicount tort and contract action
regarding the disputed cylinders in the United States District Court for the Northern District of
Illinois.
Firstly, plaintiff clearly had notice of defendant’s intent to file suit prior to its filing of the
state declaratory judgment action. Secondly, defendant filed its declaratory judgment action in
the midst of settlement negotiations. It knew that defendant preferred to settle the matter than file
suit, and only “threatened” to file suit out of frustration with plaintiff’s perceived delaying tactics.
In fact, following the October 5th letter in which a lawsuit was “threatened”, defendant was still
willing to meet with the plaintiff to settle the case. Furthermore, it was not due to any action by
defendant, but rather the plaintiff’s own assumptions about whether defendant would be willing to
still consider settling given plaintiff’s “newly-discovered” facts that precipitated the defendant’s
suspect filing of its lawsuit first. This is especially evident by its sudden cancellation of the
November 1st meeting without any notice of the filing of its declaratory judgment action. A court
should encourage good faith settlement negotiations instead of rushing to the courthouse, and
“[a]pplication of the first-filed rule should not penalize parties for their efforts to settle matters
out of court.” Eveready Battery v. Zinc Products Co., at 1062 quoting Boatmen’s First National
Bank of Kansas City, at 144. Furthermore, “[e]vidence of insufficient notice of a change in the
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first-filing party’s position on the dispute prior to filing of the first action is indicative of a rush to
the court house” demonstrating compelling reasons to preclude application of the first-to-file rule.
See, Eveready Battery v. Zine Products Co., at 1062 quoting Boatmen’s National Bank of Kansas
City, supra.
Finally, plaintiff’s declaratory judgment action does not further the goals of the DJA, and
serves no purpose than to deprive the defendant of its choice of forum and time of suit to litigate
a potential claim for damages that plaintiff was clearly apprised of for over seven months prior to
filing its declaratory judgment action. See, Creative Compounds, LLC v. Sabinsa Corp., 2004 WL
2601203, *2 (E.D.Mo. November 9, 2004)(facts of case clearly showed that plaintiff did not face
a defendant that intended to delay legal action while damages unnecessarily accrued). The plaintiff
has not identified any current loss it is suffering which can be avoided by this Court’s declaration
of the parties’ rights, nor has it identified any unnecessary accrual of damages that can only be
addressed by a declaratory judgment action. See, Eveready Battery v. L.P.I. Consumer Products,
at 890-91. It is clear to this Court that plaintiff’s declaratory judgment action is nothing more
than a preemptive strike meant to thwart defendant’s anticipatory lawsuit for damages. The filing
of a declaratory judgment action, during settlement talk, is suspect; and as such, the Court will
not apply the first-to-file rule. See, Eveready Battery v. L.P.I. Consumer Products, supra.; Beard
v. Diamond, 2010 WL 1644686 (E.D.Ark. April 20, 2010).
The next question is whether to dismiss this case or transfer the case to the Northern
District of Illinois. The Court has considered the traditional factors relating to a transfer under 28
U.S.C. §1404(a) and finds that said factors support transferring this action to the Northern
District of Illinois. The parties do not dispute that proceeding in the Northern District of Illinois
will not significantly inconvenience the parties or the fact witnesses to this action. It also appears
that documentary evidence is as easily available in the Northern District of Illinois as it is here.
Finally, although the plaintiff appears to believe that there is no dispute that the Missouri statute
of limitations is applicable to the defendant’s tort and contract claims, this Court is not so
convinced, and is certain that the Northern District of Illinois is quite capable of addressing that
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issue. Finally, it further appears that the Northern District of Illinois has already proceeded
further in the “second-filed” case than the instant case has in this Court.
Accordingly,
IT IS HEREBY ORDERED that the defendant’s motion to dismiss, or in the alternative,
to transfer to the Northern District of Illinois [6] be and is GRANTED IN PART and DENIED
IN PART. This case shall be TRANSFERRED to the United States District Court for the
Northern District of Illinois. That part of the motion requesting dismissal of this case is denied
without prejudice pending transfer of the case to the Northern District of Illinois.
IT IS FINALLY ORDERED that the Clerk of the Court shall transfer this cause of
action to the United States District Court for the Northern District of Illinois pursuant to 28
U.S.C. §1404(a).
Dated this
14th
day of April, 2011.
UNITED STATES DISTRICT JUDGE
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