New York Packaging II, LLC v. Saneck International
ORDER granting 21 Motion to Dismiss. The motion to dismiss is granted and the complaint is dismissed without prejudice. Ordered by Judge Edward R. Korman on 2/8/2017. (Schonfeld, Gabriel)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
NOT FOR PUBLICATION
NEW YORK PACKAGING II, LLC,
MEMORANDUM & ORDER
– against –
1:16-cv-03383 (ERK) (RLM)
After stops in Texas and Ohio, this dispute between sellers of plastic bags has come to the
Eastern District of New York. Defendant Saneck International moves to dismiss on the grounds
that one court is enough, and this court is not the one. Because this suit duplicates an earlier-filed
one (now pending in the Southern District of Ohio), and the relative desirability of hearing this
case in the Eastern District is not for this court to decide, the motion to dismiss is granted.
The allegations underlying this case are simple enough: In 2014, New York Packaging II
(“NYP”) invested significant resources into developing a new style of deli bag, which has since
become a significant commercial success. NYP has sought patent protection for the bag, but the
application remains unpublished, and much information about the bag’s design and manufacture
remains nonpublic and proprietary. Saneck stands accused of wrongfully obtaining—from NYP’s
Chinese manufacturing partner—a significant quantity of bags that were produced embodying
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NYP’s trade secrets and selling them in the United States, as well as passing NYP’s trade secrets
on to third parties that are doing or preparing to do the same.
Out of these prosaic facts, NYP and Saneck have now spun no fewer than three separate
federal cases. NYP struck the first blow, filing in the Southern District of Texas in May of 2016.
That complaint asked relief for violations of the Texas Uniform Trade Secrets Act, as well as unfair
competition and unjust enrichment under Texas law. But scarcely a month later, on June 21, NYP
conceded that Saneck was not subject to personal jurisdiction in Texas. In light of that concession,
the parties stipulated on July 7 to dismiss the Texas action without prejudice.
By then, Saneck had already loosed its own return salvo. A full month before the parties
agreed to resolve the Texas action, Saneck sued in the Southern District of Ohio, seeking a
declaration that Saneck has not misappropriated NYP’s trade secrets, as well as affirmative relief
founded on claims that NYP is the real wrongdoer here—that it has interfered with Saneck’s
supplier relationships, and asserted its own trade secret claims in bad faith. Saneck commenced
the Ohio action on June 8, but did not serve NYP until August 19. That case is still pending.
Finally, on June 22, in the lull between filing and service in the Ohio action, NYP filed its
complaint here. This complaint, which NYP served on July 20, asserts a federal claim for
misappropriation of trade secrets, and four claims under New York law—unfair competition,
tortious interference with a contractual and/or business relationship, unjust enrichment, and a
parallel claim for misappropriation of trade secrets. Saneck has moved to dismiss, arguing that
because this case and the Ohio action are essentially duplicates, the first-filed rule requires that
this one be discarded in favor of the earlier-filed Ohio proceeding.
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“As a general rule, where there are two competing lawsuits, the first suit should have
priority.” Employers Ins. of Wausau v. Fox Entertainment Grp., Inc., 522 F.3d 271, 274–75 (2d
Cir. 2008) (internal quotation marks omitted). The first-filed “rule,” however, “does not constitute
an invariable mandate.” Id. at 275. To be sure, the rule represents a strong presumption in favor of
the earlier-filed action—just not an irrebuttable one. The party resisting dismissal may overcome
the rule’s application by making appropriate showings that demonstrate the “desirability of
proceeding in the forum of the second-filed action.” Id. (quoting Berisford Capital Corp. v. Cent.
States Se. & Sw. Areas Pension Fund, 677 F. Supp. 220, 222 (S.D.N.Y. 1988)).
The Ohio Action is Entitled to the Benefit of the First-Filed Rule
NYP does not dispute that this case and the Ohio action present “identical or substantially
similar parties and claims.” Spotless Enters., Inc. v. The Accessory Corp., 415 F. Supp. 2d 203,
205 (E.D.N.Y. 2006) (Spatt, J.) (citing In re Cuyahoga Equip. Corp., 980 F.2d 110, 116–17 (2d
Cir. 1992)). So at the threshold—not to mention the risk of stating the obvious—to win dismissal
under the first-filed rule, Saneck has to show that the Ohio action was actually filed first.
NYP strenuously argues that the Ohio action cannot be treated as first filed, because it was
actually second to the long-since-dismissed Texas action. No one could quibble with NYP’s
chronology—the Texas action certainly has pride of place in that sense. But the legal question is
not merely which clerk of court was the first to stamp a complaint FILED, but which court was
the first to actually “obtain jurisdiction over the parties and the issues,” AEI Life, LLC v. Lincoln
Benefit Life Co., 305 F.R.D. 37, 44–45 (E.D.N.Y. 2015) (Weinstein, J.), and in that respect the
Ohio action is without peer. NYP may have been the first party to file, but its first filing failed,
and Saneck stepped into the breach. No matter how speedily launched, its Lone Star misadventure
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does not now give NYP carte blanche to file in any forum it wishes with assurances of priority
over Saneck’s earlier-filed action. As the Second Circuit has held, the first-filed rule is not simply
“a prize to the winner of a race to the courthouses.” Employers Ins. of Wausau, 522 F.3d at 275.
Nor is NYP’s later-filed New York action saved by the fact that it was served before the
Ohio complaint was served. The Second Circuit has never decided what, if any, force the order of
service should have in a district judge’s decision to apply the first-filed rule. Moreover, although
some district courts in this circuit have considered the order of service, it appears that none has
ever accorded it dispositive weight. See Everest Capital Ltd. v. Everest Funds Mgmt. L.L.C., 178
F. Supp. 2d 459, 463 (S.D.N.Y. 2002) (collecting cases). The best view seems to be that, to the
extent it matters at all, “which complaint was served first is a point of slight relevancy” that will
not carry the day absent a rare showing of injustice stemming from tardy service. See
GlycoBioSciences, Inc. v. Nycomed US, Inc., 2012 WL 540928, at *3 (E.D.N.Y. 2012) (Seybert,
J.) (internal quotation marks omitted). NYP has made no such showing here, and there is no need
to go further.
Whether This Court Is the Superior Forum Is for the Southern District of Ohio to Decide
Every circuit has recognized certain “exceptions” to the first-filed rule, keyed to showings
that the forum of the second-filed action is actually more desirable than that of the first. The Second
Circuit recognizes two. The first-filed rule may be disregarded “where special circumstances
warrant giving priority to the second suit.” Employers Ins. of Wausau. 522 F.3d at 275 (internal
quotation marks omitted). Such special circumstances are rarely recognized, but the paradigmatic
example is where a declaratory judgment action is filed in anticipation of pending litigation, and
purely in order to secure the first-moving party’s choice of venue. Id. Where no such special
circumstances exist, the first-filed rule may nevertheless be set aside “where the balance of
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convenience favors the second-filed action”—an inquiry that basically duplicates that applicable
to a motion to transfer venue. Id. (internal quotation marks omitted).
NYP devotes a significant portion of its opposition to arguing that the first-filed rule does
not apply here because the Ohio action is a disfavored anticipatory suit for a declaratory judgment.
That question, however, is properly put to the Southern District of Ohio rather than this court. The
broadly accepted rule is that, for the sake of judicial economy and the orderly administration of
justice, the court with jurisdiction over the first-filed action “is the appropriate forum to balance
all relevant . . . factors and determine whether they warrant departure from the first-to-file rule’s
presumption.” Silver Line Bldg. Prods. LLC v. J-Channel Indus. Corp., 12 F. Supp. 3d 320, 328–
29 (E.D.N.Y. 2014) (Bianco, J.).
After all, if the first-filed court decides that another district is the better venue, 28 U.S.C.
§ 1404 allows it to simply transfer the case away, with no risk of duplicative litigation. But if a
court with a later-filed case concludes that some exception to the first-filed rule applies, it has no
way to divest the first-filed forum of jurisdiction in order to consolidate the two actions. Id.
“Instead, the first-filed court would have to decide for itself whether to transfer the first-filed action
to the second-filed court, which would require an entirely duplicative round of briefing by the
parties and analysis by the court.” Id. at 329 (quoting EMC Corp. v. Parallel Iron, LLC, 914 F.
Supp. 2d 125, 130 (D. Mass. 2012)) (internal quotation marks omitted). The issues raised in NYP’s
opposition motion that go to the relative merits of the two potential fora are properly addressed to
the Southern District of Ohio in a motion to transfer venue. Indeed, the Ohio action’s docket sheet,
of which this court may take judicial notice, shows that such a motion is already pending.
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Because Saneck has made out a prima facie case for applying the first-filed rule, and the
applicability of any exception is for the Southern District of Ohio to decide, Saneck’s motion to
dismiss is granted and the complaint is dismissed without prejudice. Because dismissal is proper
under the first-filed rule, there is no need to reach the question—raised in NYP’s opposition despite
Saneck’s express reservation for another day of any motion to dismiss on that ground—of whether
Saneck is subject to personal jurisdiction in New York.
Brooklyn, New York
February 7, 2017
Edward R. Korman
Edward R. Korman
United States District Judge
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