AEI Life, LLC v. Lincoln Benefit Life Company

Filing 38

MEMORANDUM & ORDER denying defendant's 28 MOTION to Dismiss or, alternatively, to stay this action. The parties shall submit a joint letter with a proposed summary judgment briefing schedule and trial date, should summary judgment not be granted. Ordered by Judge Jack B. Weinstein on 12/21/2015. (Barrett, C)

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
MEMORANDUM & ORDER
AEI LIFE, LLC,
14-CV-6449
Plaintiff,
- againstLINCOLN BENEFIT LIFE COMPANY,
Defendant.

Parties

Appearances

AEI Life, LLC

Eric A. Biderman
Julius A. Rousseau
James M. Westerlind
Arent Fox LLP
1675 Broadway
New York, NY 10019
[phone]
[e-mail]
[e-mail]
[e-mail]

Lincoln Benefit Life Company

Katherine Leigh Villanueva
Jason P. Gosselin
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, PA 19103
[phone]
katherine. [e-mail]
[e-mail]

JACK B. WEINSTEIN, Senior United States District Judge
Table of Contents
I.

Introduction ......................................................................................................................... 2

II.

Facts ..................................................................................................................................... 3
A.
B.

New York Action ..................................................................................................... 4

C.
III.

New Jersey Action ................................................................................................... 3

LBL's Renewed Motion .......................................................................................... 5

Law ...................................................................................................................................... 6
A.

B.
IV.

Motion to dismiss for improper venue .................................................................... 6
"First-to-File" Rule .................................................................................................. 6

Application of Law to Facts ................................................................................................ 9
A.
B.

I.

The New York Action is procedurally more advanced ......................................... 10

C.
V.

This case, not the New Jersey Action,
is the first to have established jurisdiction............................................................... 9

The balance of convenience favors the Eastern District of New York ................. 11

Conclusion ......................................................................................................................... 12

Introduction
This case is ruled by an aspect of the "first to file" doctrine. There appears to be a split in

authority as to whether, under the "first to file" rule, the "first" case is to be determined based on
time of filing or on the acquisition of subject matter and personal jurisdiction.
Absent strong considerations of efficiency, or an impact on substantive rights, the "first"
case is the one in which the court obtains both subject matter and personal jurisdiction.
An action almost identical to the one started here was filed first in the United States

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District Court for the District of New Jersey. The New Jersey court has not yet established
personal jurisdiction over the parties or moved beyond initial motion practice. In contrast, here
jurisdiction has been established over the parties and discovery is almost completed.

It is inappropriate to dismiss, stay, or transfer this case to New Jersey. Defendant's
motion to dismiss or, in the alternative, to stay, is denied.

II.

Facts
A detailed factual background is set out in the February 24, 2015 memorandum and

order. See AEI Life, LLC v. Lincoln Ben. Life Co., 305 F.R.D. 37, 40-42 (E.D.N.Y. 2015). It is
deemed incorporated in this memorandum and order.

A. New Jersey Action
In June of 2013, defendant Lincoln Benefit Life Company ("LBL") sued plaintiff AEI
Life, LLC ("AEI") and four other defendants in the District of New Jersey. See Lincoln Benefit
Life Co. v. AEJ Life, LLC, No. 13-CV-4117 (D.N.J. July 3, 2013) ("New Jersey Action"). LBL
claimed that AEI and its codefendants illegally sought to benefit from a stranger-owned life
insurance ("STOLi") scheme in collusion with the insured, Gabriella Fischer.
Denying jurisdictional discovery, the New Jersey District Court dismissed the New
Jersey Action for lack of subject matter jurisdiction. LBL appealed to the Court of Appeals for
the Third Circuit. See Hr'g Tr., Feb 23, 2015, ECF No. 36, at 3: 10-22.
On September 2, 2015, the Third Circuit Court of Appeals vacated the New Jersey
District Court's dismissal, holding that LBL had sufficiently alleged subject matter jurisdiction.
Lincoln Benefit Life Co. v. AEJ Life Co., 800 F.3d 99, 110-11 (3d Cir. 2015).

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-~

B. New York Action
While the appeal was pending, AEI filed the instant suit against LBL in the Supreme
Court of New York, Kings County. It sought damages for LBL's alleged breach of the policy by
bringing a federal action in New Jersey, and a declaration that LBL is barred from challenging
the validity of the policy. The case was removed to this court on diversity grounds. See Not. of
Removal by Def. Lincoln Benefit Life Co., Oct. 31, 2014, ECF No. 1 ("New York Action").
On December 17, 2014, LBL moved to dismiss the present action pursuant to Federal
Rule of Civil Procedure 12(b)(3), arguing that principles of comity and the "first-to-file" rule
required dismissal. Alternatively, LBL moved to stay the present case pending resolution of the
appeal of the New Jersey Action or the New Jersey District Court's determination of whether the
"first-to-file" rule applies. See Def. Lincoln Benefit's Not. of Mot. to Dismiss or Alternatively
Stay, Dec. 17, 2014, ECF No. 6.
On February 24, 2015, LBL's motion to dismiss or stay was denied. Venue was held to
be proper in the Eastern District of New York; and, because the earlier filed case in the New
Jersey District Court had been dismissed for lack of jurisdiction, the "first-to-file" rule did not
apply. AEI Life, LLC, 305 F.R.D. at 43, 46. LBL was given leave to re-file its motion ifthe
United States Court of Appeals for the Third Circuit reversed the New Jersey District Court's
dismissal. Hr'g Tr., Feb. 23, 2015, ECF No. 36, at 5:18-23, 8:20-24.
Since the Eastern District's February 24, 2015 order, the parties have neared completion
of discovery in the New York action. See Hr'g Tr., Dec. 21, 2015. The magistrate judge has
certified that the case is now ready for trial. See Order Certifying Discovery is Complete, Nov.
19, 2015, ECFNo. 30.

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C. LBL's Renewed Motion
On November 2, 2015, LBL renewed its motion in the Eastern District to dismiss or,
alternatively, to stay the instant action. It again argues that this case should be dismissed in
deference to general principles of comity and judicial efficiency, or, in the alternative, should be
stayed so that the New Jersey District Court can rule on the applicability of the "first-to-file"
doctrine. See Lincoln Benefit Life Co.'s Renewed Mot. to Dismiss, or Alternatively, to Stay,
Nov. 2, 2015, ECF No. 28-1 ("LBL Mem.''), at 7-10.
In opposition, AEI argues that LBL's original motion was denied because transferring the
case to New Jersey would result in delay, something the "first-to-file" rule was designed to
avoid. Pl.'s Mem. of Law in Opp'n to Def.'s Renewed Mot. to Dismiss or Stay this Action, Nov.
19, 2015, ECF No. 31 ("AEI Opp'n Mem."), at 1. AEI contends that any delay in the resolution
of its rights under the insurance contract will be prejudicial since AEI continues to pay policy
premiums while LBL attempts to have the policy voided. Id. at 6-7.
LBL contends that the New Jersey action is more comprehensive than the instant action,
that the insurance contract was signed in New Jersey and is governed by New Jersey law, and
that New Jersey has a strong policy interest in the action. Reply of Lincoln Benefit Life Co. in
further support of its Renewed Mot. to Dismiss or Alternatively to Stay, Nov. 30, 2015, ECF No.
33 ("LBL Reply Mem."), at 9-11. It also points out that a separate policy, in addition to the one
sued on in the Eastern District of New York, is before the New Jersey court. See Hr'g Tr., Dec.
21, 2015. New Jersey law will be recognized by this court. The two policies sued on in New
Jersey involve identical issues of fact and law; a decision in this court will effectively decide the
merits controlling both insurance policies. See id.

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III.

Law
A. Motion to dismiss for improper venue
On a motion to dismiss a complaint under Rule 12(b)(3) for improper venue, the plaintiff

bears the burden of establishing that venue is proper. Anonymous v. Kaye, 104 F.3d 355 (2d Cir.
1996); Cold Spring Harbor Lab. v. Ropes & Gray LLP, 762 F. Supp. 2d 543, 551 (E.D.N.Y.
2011 ). In analyzing a claim of improper venue, a district judge will view the facts in the light
most favorable to the plaintiff. Phillips v. Audio Active Ltd., 494 F.3d 378, 384 (2d Cir. 2007).
The decision whether to dismiss an action for improper venue is committed to the court's "sound
discretion." Cold Spring Harbor Lab., 762 F. Supp. 2d at 551 (citing Minnette v. Time Warner,
997 F.2d 1023, 1026 (2d Cir. 1993)).

B. "First-to-File" Rule
"In the interest of judicial economy, the first-to-file rule allows a court to stay an action
that involves the same parties, issues, and facts as an action currently pending in another court."
AEI Life, LLC, 305 F.R.D. at 44. "There is a general presumption that where there are two
competing lawsuits, the first suit should have priority, absent the showing of [a] balance of
convenience or special circumstances giving priority to the second." Dornoch Ltd. ex rel.
Underwriting Members of Lloyd's Syndicate 1209 v. PBM Holdings, Inc., 666 F. Supp. 2d 366,
369 (S.D.N.Y. 2009) (citing First City Nat'/ Bank & Trust Co. v. Simmons, 878 F.2d 76, 79 (2d
Cir. 1989)). The "first-to-file" rule "states that, in determining the proper venue, where there are
two competing lawsuits, the first suit should have priority." NY. Marine & Gen. Ins. Co. v.
Lafarge N Am., Inc., 599 F.3d 102, 112 (2d Cir. 2010) (internal quotation marks and citation
omitted).
The rule does not provide "an invariable mandate." Emp 'rs Ins. of Wausau v. Fox Entm 't

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Grp., Inc., 522 F.3d 271, 275 (2d Cir. 2008). Instead, it relies on an inference in favor of
proceeding in the forum where the first complaint was filed. Id. It is not meant to be applied in
a "rigid" or "mechanical" way, "and is quite commonly overcome where circumstances
warrant." Dornoch Ltd., 666 F. Supp. 2d at 369. Whether to apply the "first-to-file" rule is
ultimately an equitable task within the sound discretion of the district judge. See, e.g., 800Flowers, Inc. v. lntercont'l Florist, Inc., 860 F. Supp. 128, 133 (S.D.N.Y. 1994).
"It is not the case first filed that has precedence; rather, it is the court that first obtains

jurisdiction over the parties and the issues that should normally proceed with the litigation." AEI
Life, 305 F.R.D. at 44-45; see also AEP Energy Servs. Gas Holding Co. v. Bank ofAm., NA.,
626 F.3d 699, 722 (2d Cir. 2010) ("We have recognized the basic proposition that the first court
to obtain jurisdiction of the parties and of the issues should have priority over a second court to
do so ... Deference to the first filing embodies considerations of judicial administration and
conservation of resources and recognizes that a party who first brings an issue into a court of
competent jurisdiction should be free from the vexation of concurrent litigation over the same
subject matter.") (citations omitted, emphasis added); Silver Line Bldg. Prods. LLC v. J-Channel
Indus. Corp., 12 F. Supp. 3d 320, 325 (E.D.N.Y. 2014) (noting that first-filed action is "the first
court to acquire jurisdiction" over parties); see also Lipari v. US. Bancorp NA, 345 F. App'x
315, 317 (10th Cir. 2009) ("first-to-file" rule "pertains when two district courts have jurisdiction
over the same controversy, affording deference to the first filed lawsuit") (emphasis added); but
see Merial Ltd. v. Cipla Ltd., 681 F.3d 1283, 1299 (Fed. Cir. 2012) (relevant date is date
complaints were filed); Promold & Tool, LLC v. Polylok, Inc., No. 3:11-CV-00660, 2012 WL
1947207, at *2 (W.D. Ky. May 30, 2012) ("Under the 'first-to-file' rule, 'when actions involving
nearly identical parties and issues have been filed in two different district courts, the court in
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which the first suit was filed should generally proceed to judgment.'") (quoting Certified

Restoration Dry Cleaning Network, L.L.C. v. Tenke Corp., 511F.3d535, 551 (6th Cir. 2007))
(emphasis added).
When the second filed action has developed substantially further than the initial suit, the
"first to file" rule is generally not applied. See Charlot v. Ecolab, Inc., 97 F. Supp. 3d 40, 63
(E.D.N.Y. 2015) (transfer of case inappropriate where case pending in Eastern District of New
York was procedurally more advanced than case pending in other court); Connors v. Lexington

Ins. Co., 666 F. Supp. 434, 455 (E.D.N.Y. 1987) (noting "well-established exception[]" to rule
"when the first filed action has not reached a more advanced stage than its counterpart"); Tarazi

v. Truehope Inc., 958 F. Supp. 2d 428, 436 (S.D.N.Y. 2013) (consideration of which case was
"first" is diminished "where the first-filed action has not reached a more advanced stage than the
later action") (citations omitted); see also Orthmann v. Apple River Campground, Inc., 765 F.2d
119, 121 (8th Cir. 1985); Church of Scientology v. US. Dep't. ofArmy, 611 F.2d 738, 750 (9th
Cir. 1979); cf Yoder v. Heinold Commodities, Inc., 630 F. Supp. 756, 760-61 (E.D. Va. 1986)
("Foremost among [the] equitable considerations are the timing and circumstances surrounding
the filing of [the first suit].").
The "first-to-file" doctrine is also generally not applied when the "balance of
convenience"--determined using the same factors considered in connection with general
motions to transfer venue-"favors the second-filed action." Emp 'rs Ins. of Wausau, 522 F.3d at
275. The Court of Appeals for the Second Circuit has emphasized that the "first-to-file" rule
may be ignored when there is convincing "proof of the desirability of proceeding in the forum of
the second-filed action"; the "balance of convenience" analysis comprises the "centrality" of the
doctrine. NY. Marine & Gen. Ins. Co., 599 F.3d at 113 (quoting Emp 'rs Ins. of Wausau, 522

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F.3d at 275-76); accord Honeywell Int 'l Inc. v. Int 'l Union, United Auto Aerospace & Agric.
Implement Workers of Am., 502 F. App'x 201, 205 (3d Cir. 2012) ("[T]he first-filed rule may
properly be departed from as the equities of a given case require ... [including where] the
balance of convenience favors the second-filed action.") (internal quotation marks and citations
omitted).
Seven factors inform the "balance of convenience" analysis: (1) plaintiffs choice of
forum; (2) convenience of the witnesses; (3) location of relevant documents and relative ease of
access to sources of proof; (4) convenience of the parties; (5) locus of operative facts;
(6) availability of process to compel attendance of unwilling witnesses, and (7) relative means of
the parties. Emp 'rs Ins. of Wausau, 522 F.3d at 275; see also Weber-Stephen Prods. Co. v. Ivy
Mar Co., No. 93-CV-5462, 1994 WL 11711, at *1 (N.D. Ill. Jan. 13, 1994) (refusing to stay

second filed action, and directing preliminary discovery disputes away from the first-filed forum,
which was not then in a position to promptly resolve discovery disputes).

IV.

Application of Law to Facts
The "first to file" rule should not be applied in this case. The Eastern District was the

first to establish jurisdiction over the parties, the New York Action is procedurally far more
advanced than the New Jersey Action, and the balance of convenience weighs against
transferring the case.

A. This case, not the New Jersey Action, is the first to have established jurisdiction
The "first-to-file" rule does not, as LBL contends, tum on the date on which competing
actions were filed. LBL Mem. at 6; LBL Reply Mem. at 4-5. Rather, for purposes of the rule,
the "first filed" action is the first in which the court obtained jurisdiction over the parties. First
City National Bank & Trust Co. v. Simmons, 878 F.2d 76 (2d Cir. 1989), which LBL relies upon,

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does not compel the conclusion it favors. LBL Mem. at 7. In First City, the court of appeals
affirmed decisions by two district judges dismissing cases in favor of earlier-filed actions
pending in Oklahoma federal court. First City Nat'/ Bank, 878 F.2d at 80. The court of appeals
noted that "[t]he Oklahoma court has already determined that it has jurisdiction of all parties to
this dispute." First City Nat. Bank, 878 F.2d at 80. The First City National Bank's holding does
not provide guidance in the instant case, where jurisdiction was not established in the earlier-intime action.
Since the New York Action was removed from the New York State Supreme Court on
October 31, 2014, neither AEI nor LBL has challenged this court's subject matter or personal
jurisdiction over the case and parties. AEI has indicated that it plans to renew its motion to
dismiss in the New Jersey District Court for lack of personal jurisdiction. AEI Opp'n Mem. at 9.
Because this court was the first to obtain jurisdiction over the parties, for purposes of the
"first to file" rule, the New York Action is deemed the earlier.

B. The New York Action is procedurally more advanced
Even ifthe New Jersey Action were the first filed for purposes of the rule, the New York
Action is procedurally more advanced than the New Jersey Action. As noted above, while the
New Jersey Action is about to commence on a round of dismissal briefing, the New York Action
has been certified as trial-ready.
Because the New York Action is procedurally more advanced than the New Jersey
Action, the "first-to-file" rule does not require a transfer. Rather, judicial efficiency is better
served by keeping the case here.

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C. The balance of convenience favors the Eastern District of New York
Balance of convenience analysis does not favor dismissing or staying the New York
Action. There has been no change in the relevant facts since the balance of convenience analysis
was performed in connection with the order of February 24, 2015:

First, as the plaintiff in this action, AEI is entitled to some
deference in choosing the forum. As a limited liability company
with a principal place of business in Brooklyn, New York, the
United States District Court for the Eastern District of New York is
plaintiffs home forum; New Jersey is not the home forum of either
party.
Second, although defendant is a Nebraska resident, with respect to
witnesses, it should not be less convenient for the case to be
litigated and tried in New York than in New Jersey. AEI's
witnesses, in addition to the insured, and the representative of the
trust are located in New York.
Third, the location of relevant documents and sources of proof in
this action are likely located in New York since all of defendants in
LBL's original action brought forward in New Jersey were based
in New York.
Fourth, because the witnesses, documents, and other relevant
sources of proof are in New York, it is convenient for the parties to
try the action here.
Fifth, the locus of operative facts points to New York: ( 1) the
insured resided in Brooklyn at the time the policy originated;
(2) the trust to which the policy was delivered has its situs in New
York; (3) AEI acquired the policy from a New York company, in a
transaction negotiated and executed in New York; and (4) all those
involved in the alleged STOLI scheme are based in New York.
While substantive New Jersey law may govern the dispute, choice
of law alone is not dispositive of venue.
Sixth, because essential witnesses to this dispute appear to reside in
New York, and not in New Jersey, this court has the power to
compel their testimony.
Seventh, the means of the parties is not a significant factor in this
case. The defendant has assets sufficient to litigate in New York.
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See Allstate Closes Sale of Lincoln Benefit Life,
insurancenews.net, April 1, 2014, available at: http://
insurancenewsnet.com/article/2014/04/01 ("Net income generated
by [LBL] was approximately $140 million in 2013 .").
AEI Life, 305 F.R.D. at 46.

The United States District Court for the Eastern District of New York is now the
appropriate venue.

V.

Conclusion
Defendant's motion to dismiss or, alternatively, to stay this action is denied. The parties

shall submit a joint letter with a proposed summary judgment briefing schedule and trial date,
should summary judgment not be granted.

Ja B. Weinstein
Senior United States District Judge
Dated: December 21, 2015
Brooklyn, New York

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