Sammons et al v. COR Clearing et al
Filing
40
MEMORANDUM AND ORDER - Plaintiffs' motions for partial summary judgment (Filing No. 6 & Filing No. 8 ) are denied as moot. Defendant COR Clearing's motion to dismiss (Filing No. 24 ) is granted. Defendants Cede & Co.'s and The Depository Trust Company's motion to dismiss (Filing No. 27) is granted. This action is dismissed without prejudice. Ordered by Judge Joseph F. Bataillon. (MKR)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
ELENA SAMMONS and MICHAEL
SAMMONS,
8:14CV136
Plaintiffs,
v.
MEMORANDUM AND ORDER
COR CLEARING, CEDE & CO., and
THE DEPOSITORY TRUST COMPANY,
Defendants.
This matter is before the court on the plaintiffs’ motions for partial summary
judgment, Filing No. 6 & Filing No. 8; defendant COR Clearing’s (COR’s) motion to
dismiss, Filing No. 24; and defendants Cede & Co.’s and The Depository Trust
Company’s (collectively “the DTC defendants”) motion to dismiss, Filing No. 27.1 This is
a pro se action for declaratory relief in connection with assertion of dissenters’ rights
with respect to securities. The plaintiffs allege breach of contract, breach of fiduciary
duty, and negligence claims against the defendants related to an alleged failure to
properly process their dissent to a stock split involving China Energy Corp. (“CEC”).
Defendant COR moves to dismiss under the “first-filed rule” and for lack of
subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1). It asserts that a case involving
the same parties and issues is presently pending in the United states District Court for
the District of Nevada, China Energy Corp. v. Hill et al., No. 3:13-cv-00562 (“CEC v. Hill”
or “the Nevada Action”). It also asserts that the court lacks subject matter jurisdiction
because the plaintiffs’ claims are conditioned on the outcome of the Nevada action and
1
In an earlier order, the court granted the defendants’ motion to stay briefing on the plaintiffs’
motions for partial summary judgment pending a ruling on the defendants’ motions to dismiss in the
Nevada action. Filing No. 6 & Filing No. 8. In light of the court’s disposition, the summary judgment
motions will be denied ad moot. Similar motions are pending in the Nevada action.
either present no live cases or controversy or are premature. The DTC defendants
argue that this court lacks personal jurisdiction over them for lack of minimum contacts
with the district of Nebraska.
In response to the defendants’ motions, the plaintiffs generally agree with the
defendants’ “first-filed rule” argument, but contend the action should be transferred and
consolidated with the pending Nevada action rather than dismissed. They also argue
that both the Nevada and Nebraska federal courts have subject matter and personal
jurisdiction over their claims. In its sur-reply brief, the plaintiffs appear to concede that
filing in this court was improvident. Plaintiffs state “[b]ut for the erroneous opinion of the
magistrate in Nevada [later reversed by the district court], plaintiffs would not have
refiled in Nebraska.” Filing No. 34, Motion at 1, n.1.
The record shows that China Energy Corporation (“CEC”) filed a complaint in
Nevada state court against Michael Sammons and others, seeking either declaratory
relief or a determination of its stock value. CEC v. Hill, Docket (“Dkt.”) No. 2, Petition for
Removal, Ex. 1, State Court Summons/Complaint.2
CEC seeks a declaration that
certain shareholders including the plaintiffs in this action had not properly dissented to a
stock split. Id. at 2. That action was removed by Michael Sammons, plaintiff herein, to
the United States District Court for the District of Nevada on October 8, 2013. Id., Filing
No. 2; see Document 226, Order at 1-2. The Sammonses filed a Third-Party Complaint
in the Nevada action against the DTC defendants, and COR. See id., Dkt. Nos. 116 &
128. In that pro se complaint, the Sammonses allege that the DTC defendants and
2
These citations are gleaned from the federal courts’ PACER service, but copies of most relevant
filings in the Nevada action have also been filed as exhibits in this court. See Filing No. 26, Index of
Evid., Index of Evid., Exs. 1 – 28; Filing No. 33, Index of Evid., Exs. 1 – 4.
2
COR vitiated their ability to dissent to CEC’s stock split and, in so doing, breached a
contract, breached fiduciary duties, and were negligent. Id., Filing No. 226, Order at 2.
Those are essentially the same allegations that the plaintiffs make herein. See Filing
No. 1, Complaint. The Sammonses moved for leave to file a third-party complaint in the
Nevada action on November 13, 2013, and leave was granted on January 22, 2014.
CEC v. Hill, Dkt No. 54, Motion; Dkt. No. 115, Order. The original third-party complaint
in the Nevada action was filed on January 22, 2014, and the first amended third-party
complaint was filed on January 29, 2014. Id., Dkt. No. No. 116, Third-Party Complaint;
Dkt. No. 128. The complaint in this case was filed on April 28, 2014. Filing No. 1,
Complaint.
In denying COR’s motion to dismiss the plaintiffs’ third-party claim in the Nevada
action, the Nevada district court found that the Sammonses third-party complaint
involved the same loss that would arise from CEC’s complaint and held that the
Sammonses had properly impleaded the third-party defendants. Id., Filing No. 226,
Order at 5-6.
Further, in correspondence to the judge in the Nevada action, the
Sammonses stated that the present “identical lawsuit” had been filed in this district in
anticipation of a finding by the Nevada court that jurisdiction did not exist. See id., Dkt.
No. 247, Letter dated Aug. 13, 2014. The Sammonses motion for partial summary
judgment, substantively identical to that filed herein, remains pending in the Nevada
action. See id., Dkt. No. 71, 229, Motion. By order dated August 18, 2014, the district
court in Nevada noted that it “anticipates ruling on Plaintiff’s Motion for Partial Summary
Judgment (Dkt. no. 71) by the end of September 2014.” Id., Dkt. No. 248, minute order.
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I. LAW
Under the “first to file rule,” where two courts have concurrent jurisdiction, the first
court in which jurisdiction attaches has priority to consider the case. Orthmann v. Apple
River Campground, Inc., 765 F.2d 119, 121 (8th Cir.1985).
Absent compelling
circumstances, “‘the court initially seized of a controversy should be the one to decide
the case.’” Id. (quoting Merrill Lynch, Pierce, Fenner & Smith v. Haydu, 675 F.2d 1169,
1174 (11th Cir. 1982); see also Colo. River Water Conservation Dist. v. United States,
424 U.S. 800, 817 (1976) (“As between federal district courts, . . . the general principle
is to avoid duplicative litigation.”). This rule recognizes the comity concerns between
coequal federal courts and promotes efficient use of judicial resources by authorizing a
latter-filed, substantially similar action’s stay or dismissal in deference to an earlier case.
Orthmann, 765 F.2d at 121.
The first-filed rule “is not intended to be rigid, mechanical, or inflexible, but is to
be applied in a manner best serving the interests of justice.” Northwest Airlines, Inc. v.
American Airlines, Inc., 989 F.2d 1002, 1005 (8th Cir. 1993). However, “[t]he prevailing
standard is that in the absence of compelling circumstances, the first-filed rule should
apply.” Id. A federal district court has discretion to dismiss, stay, or transfer a case to
another district court under the “first-to-file rule.” See Alltrade, Inc. v. Uniweld Products,
Inc., 946 F.2d 622, 629 (9th Cir. 1991). “[W]here the first-filed action presents a
likelihood of dismissal, the second-filed suit should be stayed, rather than dismissed.”
Id. “A plaintiff ‘should not be’ allowed to ‘litigate the same issue at the same time in
more than one federal court.’” Blakely v. Schlumberger Tech. Corp., 648 F.3d 921, 932
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(8th Cir. 2011) (quoting Crowley Cutlery Co. v. United States, 849 F.2d 273, 279 (7th
Cir. 1988) (dismissing duplicative claims).
The court finds that the most efficient use of judicial resources would be to
dismiss this action. Based upon the Nevada district court’s denial of defendant COR’s
motion to dismiss in the Nevada action, the court finds there is little likelihood that the
action against the other defendants will be dismissed.3 The plaintiffs appear to concede
that their interests can properly be protected in the Nevada action. A transfer is not
necessary because both actions involve the same parties and issues and the actions
are substantively identical.4 Transfer of the case would result in duplicative litigation.
The action in Nevada has over 400 docket entries. The court sees no reason to further
complicate the matter. Accordingly, the court finds the defendants’ motions to dismiss
should be granted.
In light of this disposition, the court need not address the
defendants’ other arguments. Accordingly,
IT IS ORDERED that:
1.
Plaintiffs’ motions for partial summary judgment (Filing No. 6 & Filing No. 8)
are denied as moot.
2. Defendant COR Clearing’s motion to dismiss (Filing No. 24) is granted.
3. Defendants Cede & Co.’s and The Depository Trust Company’s motion to
dismiss (Filing No. 27) is granted.
3
In any event, the plaintiffs will not be harmed by a dismissal without prejudice.
4
Contrary to the plaintiffs’ assertion in their responses to the motions to dismiss, Filing No. 30
and Filing No. 31, that the Nebraska action contains an additional claim for breach of contract, the record
shows the plaintiffs asserted a similar breach of contract claim in the Nevada action. See Nevada action,
Filing No. 128, First Amended Third-Party Complaint at 11. In addition, the plaintiffs would arguably be
granted leave to amend the complaint in the Nevada action should a necessity arise.
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4. This action is dismissed without prejudice.
DATED this 16th day of September, 2014.
BY THE COURT:
s/ Joseph F. Bataillon
United States District Judge
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