WESTCODE, INC. v. MITSUBISHI ELECTRIC CORPORATION

Filing 65

MEMORANDUM-DECISION AND ORDER granting in part and denying in part 10 Motion to Dismiss for Failure to State a Claim: The Court hereby ORDERS that Defendant's motion to dismiss (Dkt. No. 10) is DENIED as to Counts I, II,and III of Plaintiff&# 039;s complaint and GRANTED as to Count IV; and the Court further ORDERS that Count IV of Plaintiff's complaint is DISMISSED; and the Court further ORDERS that Defendant's request to transfer the action is DENIED as moot; and the Court further ORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision and Order on all parties in accordance with the Local Rules. Signed by U.S. District Judge Mae A. D'Agostino on 3/18/16. (ban)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
____________________________________________
WESTCODE, INC.,
Plaintiff,
vs.

3:15-cv-1474
(MAD/DEP)

MITSUBISHI ELECTRIC CORPORATION,
Defendant.
____________________________________________
APPEARANCES:

OF COUNSEL:

HANCOCK, ESTABROOK LAW FIRM
100 Madison Street - Suite 1500
Syracuse, New York 13221-4976
Attorneys for Plaintiff

JOHN G. POWERS, ESQ.
ASHLEY D. HAYES, ESQ.

PHILLIPS, CAMPBELL LAW FIRM
314 North Middletown Road
Lima, Pennsylvania 19037
Attorneys for Plaintiff

PATRICK C. CAMPBELL, JR., ESQ.

JENNER, BLOCK LAW FIRM
Clark Street, Chicago Office
353 North Clark Street
Chicago, Illinois 60654
Attorneys for Defendant

CATHERINE L. STEEGE, ESQ.
JOEL T. PELZ, ESQ.
TERRENCE J. TRAUX, ESQ.

JENNER, BLOCK LAW FIRM
District of Columbia Office
1099 New York Avenue - Suite 900
Washington, DC 20001

WILLIAM C. PERICAK, ESQ.

Mae A. D'Agostino, U.S. District Judge:
MEMORANDUM-DECISION AND ORDER
I. INTRODUCTION
Plaintiff Westcode, Inc. ("Plaintiff") commenced this action seeking a declaratory
judgment pursuant to the Pennsylvania Declaratory Judgments Act, 42 Pa.C.S.A. § 7351 et seq.,

on May 5, 2015, in the Court of Common Pleas, Chester County, Pennsylvania. See Dkt. No. 1 at
12. Defendant Mitsubishi Electric Corporation ("Defendant") removed the action to the District
Court for the Eastern District of Pennsylvania on May 27, 2015. See id. at 7. The case was
transferred to this Court on December 11, 2015. See Dkt. Nos. 32, 33. Currently pending before
the Court is Defendant's motion to dismiss pursuant to Rules 12(b)(1) & 12(b)(6),1 which Plaintiff
has opposed. See Dkt. Nos. 10, 11.
II. BACKGROUND2
Plaintiff is a Pennsylvania corporation that manufactures and assembles heating,
ventilation, and air conditioning components for use in rail cars. Dkt. No. 11 at 3. Defendant is a
Japanese corporation that also designs and manufactures systems for rail cars. Id. In 1997, the
parties entered into an agreement titled the License and Technical Assistance Agreement
("LTAA"), which gave Plaintiff access to Defendant's designs. Id. at 3-4. The terms of the
LTAA required Plaintiff to "pay a onetime upfront fee of $900,000.00 plus a royalty of 3% of the
net sales price on finished product[s] [Plaintiff] sold to customers." Id. at 4. Thereafter, the
parties entered into a Joint Venture Agreement ("JVA"), which "was effective for the term of the
project known as the New York City Transit Authorty R142A Project" (the "R142A project"). Id.
Under the JVA, the parties would split revenues generated by the sale of units for the R142A
project, with approximately 47% to Plaintiff and 53% to Defendant. Id. At the termination of the

Defendant also filed a motion to compel arbitration on September 9, 2015, see Dkt. No.
21, which will be addressed in a subsequent decision by this Court.
1

The majority of the parties' arguments in the motion to dismiss concern whether the
action should be transferred from the Eastern District of Pennsylvania to this Court. In light of
the Eastern District of Pennsylvania's December 8, 2015 order directing such transfer, the
following discussion does not address those arguments.
2

2

JVA, the parties continued the economic terms stated therein for the R143, R160, and PATH
projects. Id. In 2008, Plaintiff fell behind on payments to Defendant for the R142A, R143, and
R160 projects. Id. On November 13, 2008, the parties entered into a Memorandum of
Understanding ("MOU") to restructure the payment terms for said projects with the amount due
of $14,869,967.06. Id. at 4-5.
On April 27, 2015, Defendant filed suit in this Court3 alleging that Plaintiff beached its
obligation to pay approximately $10.8 million due under the MOU. See Dkt. No. 10 at 10.
Thereafter, on May 5, 2015, Plaintiff commenced the instant action in the Court of Common
Pleas in Chester County, Pennsylvania. See Dkt. No. 1 at 12. On May 27, 2015, Defendant
removed the instant action to the District Court for the Eastern District of Pennsylvania on the
basis of diversity jurisdiction. See id. at 7. Defendant then filed the instant motion to dismiss on
July 1, 2015 and subsequent motion to compel arbitration on September 9, 2015. See Dkt. Nos.
10, 21. Prior to reaching the merits of these motions, on December 8, 2015, the Eastern District
of Pennsylvania ordered the transfer of the action to this Court (the "December 8 Order"),
pursuant to the first-filed doctrine and in connection with Defendant's pending action filed in this
Court. See Dkt. Nos. 32, 33.
In the instant action, Plaintiff's complaint poses four separate claims for relief. Each count
seeks a declaration from the Court that Defendant is barred by the statute of limitations from
bringing an action against Plaintiff for payments due under the above-listed agreements and
projects. Count I addresses payments pursuant to the LTAA, Count II for payments pursuant to

Any citations to docket entries from this related case will be cited as Case No. 3:15-cv505, Dkt. No. __.
3

3

the JVA, Count III for payments due on the R143, R160, and PATH projects, and Count IV for
payments pursuant to the MOU. Dkt. No. 1 at 16-19 ¶¶ 32-42.

III. DISCUSSION
Defendant's motion to dismiss raises three separate arguments: (1) that the "first-filed"
rule mandates dismissal or transfer of the action because Count IV is duplicative of a claim
presented in its related case filed in this Court; (2) that the Court lacks subject matter jurisdiction
to hear the case because the claims stated in Counts I, II, and III are not ripe for review; and (3)
that the Court should exercise its discretion under the Declaratory Judgment Act to dismiss the
complaint. See Dkt. No. 10 at 8-9.
Defendant filed the instant motion prior to the December 8 Order transferring the action to
this Court, thus, Defendant's request for a transfer is denied as moot.

A.

Standard of Review
As an initial matter, the Court notes that Second Circuit law applies in deciding

Defendant's motion to dismiss pursuant to the Federal Rules of Civil Procedure, notwithstanding
that the motion was filed in the Eastern District of Pennsylvania. See Smith v. Railworks Corp.,
No. 10 Civ. 3980, 2012 WL 752048, *5 (S.D.N.Y. Mar. 6, 2012) ("Generally, 'a transferee federal
court must apply its own interpretation of federal law, not the construction of the transferring
court's circuit") (citations and quotations omitted)).

1. Rule 12(b)(1) Motion to Dismiss
When a party moves to dismiss a claim pursuant to Federal Rule of Civil Procedure
12(b)(1), "the movant is deemed to be challenging the factual basis for the court's subject matter
jurisdiction." Cedars-Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1583 (Fed. Cir. 1993) (citations
4

omitted). For purposes of such a motion, "the allegations in the complaint are not controlling, and
only uncontroverted factual allegations are accepted as true . . . ." Id. (internal citations omitted).
Both parties are permitted to use affidavits and other pleading materials to support and oppose the
motion to dismiss for lack of subject matter jurisdiction. See Makarova v. United States, 201 F.3d
110, 113 (2d Cir. 2000) (citation omitted). "Furthermore, 'jurisdiction must be shown
affirmatively, and that showing is not made by drawing from the pleadings inferences favorable to
the party asserting it.'" Gunst v. Seaga, No. 05 Civ. 2626, 2007 WL 1032265, *2 (S.D.N.Y. Mar.
30, 2007) (quoting Shipping Fin. Servs. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir. 1998)); see
also State Empls. Bargaining Agent Coal. v. Rowland, 494 F.3d 71, 77 n.4 (2d Cir. 2007)
(holding that, in a motion to dismiss for lack of subject matter jurisdiction, a court "may resolve
disputed factual issues by reference to evidence outside the pleadings, including affidavits").
Since ripeness is a jurisdictional requirement, a motion pursuant to Rule 12(b)(1) is the proper
mechanism for a defendant seeking to dismiss a declaratory judgment action on the grounds that
the claims therein are not yet ripe. See Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., 261
F. Supp. 2d 293, 294 (S.D.N.Y. 2003) (citations omitted).

2. Declaratory Judgment Act
"[A]ny court of the United States . . . may declare the rights and other legal relations of
any interested party seeking such declaration, whether or not further relief is or could be sought."
28 U.S.C. § 2201(a); see also Chirik v. TD BankNorth, N.A., No. 06-04866, 2008 WL 186213, *5
(E.D. Pa. Jan. 15, 2008) ("[E]ven though Plaintiff brought [its] claim under Pennsylvania's
declaratory judgment statute, federal standards for declaratory relief apply"). A district court is
without jurisdiction to hear an action for declaratory relief unless such case presents an "actual
controversy." 28 U.S.C. § 2201(a); see also Calderon v. Ashmus, 523 U.S. 740, 745-46 (1998).
5

To rise to the level of an actual controversy, the relief requested must be for "a decree of a
conclusive character, as distinguished from an opinion advising what the law would be upon a
hypothetical state of facts." Calderon, 523 U.S. at 746 (quotation omitted). Whether a specific
action for declaratory relief presents a justiciable case or controversy is necessarily a degree of
ripeness. See Duane Reade, Inc., 411 F.3d at 388. The Second Circuit's "standard for ripeness in
a declaratory judgment action is that 'there is a substantial controversy, between parties having
adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a
declaratory judgment.'" Id. (quoting Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273, 61
S. Ct. 510, 85 L. Ed. 826 (1941)).
The starting point for whether a justiciable controversy exists is "whether the declaratory
relief sought relates to a dispute where the alleged liability has already accrued or the threatened
risk occurred, or rather whether the feared legal consequence remains a mere possibility, or even
probability of some contingency that may or may not come to pass." Dow Jones & Co., Inc. v.
Harrods, Ltd., 237 F. Supp. 2d 394, 406-07 (S.D.N.Y. 2002) (citing Thomas v. Union Carbide
Agric. Prod. Co., 473 U.S. 568, 580-81, 105 S. Ct. 3325, 87 L. Ed. 2d 409 (1985)). In cases
where an affirmative legal dispute has not yet occurred, "the fact that 'liability may be contingent
does not necessarily defeat jurisdiction of a declaratory judgment action.'" U.S. Dep't of Treasury
v. Official Comm. of Unsecured Creditors of Motors Liquidation Co., 475 B.R. 347, 358
(S.D.N.Y. 2012) (quoting Associated Indem. Corp. v. Fairchild Indus., 961 F.2d 32, 35 (2d Cir.
1992)). When potential liability is contingent upon uncertain events, such as anticipated
litigation, "the Second Circuit instructs courts to focus on 'the practical likelihood that the
contingencies will occur.'" Id. (quoting Associated Indem. Corp., 961 F.2d at 35); see also
Gelmart Indus., Inc. v. Eveready Battery Co., Inc., 120 F. Supp. 3d 327, 331 (S.D.N.Y. 2014)
6

("[T]he threat of future litigation remains relevant in determining whether an actual controversy
exists" (quoting Nike, Inc. v. Already, LLC, 663 F.3d 89, 96 (2d Cir. 2011))). Further,
communications "indicating a party's intent to take future legal action have been deemed a threat
of litigation sufficient to create an actual controversy for adjudication." In re Chateaugay Corp.,
201 B.R. 48, 67 (Bankr. S.D.N.Y. 1996).
In general, "a 'declaratory judgment action should be entertained when the judgment will
serve a useful purpose in clarifying and settling the legal relations in issue, and . . . when it will
terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the
proceeding.'" Classic Liquor Imps., Ltd. v. Spirits Int'l B.V., __ F. Supp. 3d__, 2015 WL
9487886, *2 (S.D.N.Y. Dec. 29, 2015) (quoting Fort Howard Paper Co. v. William D. Witter,
Inc., 787 F.2d 784, 790 (2d Cir. 1986)). Importantly, affirmative defenses to expected future
litigation may be raised in an action for declaratory judgment. See Beacon Theatres, Inc. v.
Westover, 359 U.S. 500, 508 (1959); see also BASF Corp v. Symington, 50 F.3d 555, 558 (8th
Cir. 1995) ("[C]ourts regularly consider the merits of affirmative defenses raised by declaratory
plaintiffs") (collecting cases).

B.

Plaintiff's Complaint
1. Counts I, II, & III
a. Ripeness
Defendant contends that, since it has not commenced litigation seeking to enforce its

rights under the contract provisions or projects at issue in Counts I-III, the Court lacks subject
matter jurisdiction to hear this case because the parties interests are not legally adverse. See Dkt.
No. 10 at 22-23; Dkt. No. 47 at 6-7. To support this position, Defendant cites to Certain
Underwriters at Lloyd's, London v. St. Joe Minerals Corp., 90 F.3d 671, 674 (2d Cir. 1996) and
7

Kelly v. Evolution Markets, Inc., 626 F. Supp. 2d 364, 374 (S.D.N.Y. 2009). See Dkt. No. 47 at
6-7. In Certain Underwriters, an insurance carrier brought a declaratory action seeking a
determination of whether it would be liable, as an excess insurance carrier, to cover clean-up
costs at several environmental hazard sites under the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"). 90 F.3d at 674. The Second Circuit held that the
action was not ripe, focusing on the numerous parties involved, the uncertainty of the insured's
responsibility at each site, the unknown final clean-up costs, and the extensive period of time that
the insured operated at each site prior to having coverage from the plaintiff carrier. In addressing
these issues, the court stated as follows:
Indeed, the record as a whole consists in large measure of
speculation. Uncertainty surrounds [the insured's] liability. It has
viable defenses, there are numerous other [potentially responsible
parties] to share the unestablished remedial costs, and the
challenged activity is spread out over a substantial time period,
during much of which plaintiffs' policies were not in existence.
Id. at 674.
In Kelly, the plaintiff sought a declaratory judgment to absolve himself from contractual
liability under certain non-compete agreements with his former employer. 626 F. Supp. 2d at
167. The specific section of the contract that the court addressed in its ripeness analysis was the
agreement not to recruit the defendant's former employees. Id. at 374-75. The Second Circuit
held the issue was not ripe, stating that the plaintiff "has not indicated his desire or willingness to
recruit any employee away from [his former employer]." Id. at 374. The court recognized that,
even if the plaintiff has such desire to do so, he had not identified any such individual and the
court would not speculate as to the plaintiff's potential recruitment strategy or targets. Id. at 37475.

8

The Court finds that the case at hand presents a significantly more concrete example of
adverse parties than those presented in both Certain Underwriters and Kelly. The main focus in
this inquiry is whether the court can be certain of the exact parties and claims that would arise in
any potential future litigation. Unlike Certain Underwriters, where the court was presented with
numerous potential parties susceptible to future litigation over a myriad of unknown claims, any
future litigation in this case would only involve Plaintiff vs. Defendant, arguing over the amount
due under the LTAA, the JVA, and on the R143, R160, and PATH projects. Importantly,
Plaintiff has specifically alleged that Defendant insists that it is owed $1,827,128 under the
LTAA, and $18,157,950 under the JVA and the remaining projects, such that the extent of any
potential liability is not an uncertainty left for the Court to decide. See Dkt. No. 1 at 16 ¶ 29.
Moreover, the threat of litigation is not entirely speculative, as it was in Kelly, since Defendant
has shown its willingness to litigate the issue of Plaintiff's nonpayment by commencing the
related action in this Court seeking payments under the MOU. Further, unlike Kelly, where the
plaintiff's hypothetical recruit was an unknown and unspecified individual, each claim, contract,
project, and party that would be the subject of any future legal action is clearly identified in
Plaintiff's complaint and corresponding affidavits. See Dkt. No. 1 at 12-19; Dkt. No. 11-1.
Defendant next contends that any relief that the Court could grant in this case would not
be sufficiently conclusive to resolve the parties legal disputes and, thus, would constitute an
advisory opinion. See Dkt. No. 10 at 23-24; Dkt. No. 47 at 7. The cases cited by Defendant to
support this argument, rather than standing for the proposition that a court is without jurisdiction
to provide an advisory opinion, each dismissed the underlying declaratory judgment action on a
discretionary, rather than jurisdictional, basis. In Dow Jones & Co. v. Harrods Ltd., 346 F.3d
357, 359-60 (2d Cir. 2003), the Second Circuit concluded that, although the action was within the
9

district court's subject matter jurisdiction, the court correctly exercised its discretion to dismiss a
declaratory judgment action after weighing five factors, which it stated were helpful to that
discretionary determination. The Court discusses these factors, infra, when deciding whether to
exercise similar discretion in this case. Similarly, in Panama Processes S.A. v. Cities Serv. Co.,
362 F. Supp. 735, 738 (S.D.N.Y. 1973), aff'd 496 F.2d 533 (2d Cir. 1974), the Southern District
stated that, although there was arguably a justiciable controversy between the parties, the judge
exercised the discretion not to entertain the case because the requested relief "[would] not settle
the legal relations in issue nor [would] it terminate the controversy giving rise to the proceeding."
Id. at 739-40. The relief requested in Panama Processes sought to declare that a particular
contract was in force and binding upon the parties, and to enjoin the defendant from breaching the
terms of that contract. Id. at 737. Importantly, the parties did not seek an interpretation of the
allegedly binding contract, the terms of which were in dispute between the parties. The court
concluded that, even if it granted the relief sought to declare that the agreement was binding,
subsequent litigation would be necessary to determine the duties and responsibilities that the
contract would place upon the parties, thus, resulting in piecemeal litigation. Id. at 737-38.
In this case, granting the requested relief would provide a much more concrete and
permanent answer to the legal issues underlying the instant action. In Panama Processes, the
court was presented with a case where, even if it granted the relief sought in the declaratory
judgment, future litigation would be necessary to interpret the terms of the underlying agreement.
Here, should the Court determine that any claims Defendant may have under the LTAA, JVA, or
R143, R160, and PATH projects are barred by the statute of limitations, this would provide a final
judgment that would conclusively end the potential legal disputes and financial uncertainties
between the parties arising out of these projects. With the grant of such relief, Plaintiff would no
10

longer be financially burdened by the assertion of claims against it, which have allegedly
prohibited it from conducting business and obtaining financing. See Dkt. No. 1 at 16 ¶ 30. If the
Court finds that such claims are not barred by the statute of limitations, that will also provide
relief to Plaintiff's uncertainty in knowing that it must continue to list its alleged indebtedness to
Defendant in any financial disclosures as it would potentially still be bound to repay those
amounts.
Defendant also argues that any judgment in this action would not be sufficiently
conclusive because the final determination would have to be made upon a hypothetical set of
facts. See Dkt. No. 10 at 23-24. Specifically, Defendant asserts that the parties may "disagree on
which payments were missed and when, which would affect the accrual date of the applicable
statute of limitations and thus the final judgment." Id. at 24. Contrary to this unsupported
assertion, Plaintiff has sufficiently alleged the due date of any payments arising under each of the
agreements. See Dkt. No. 1 at 13-15 ¶¶ 9, 10, 18-22, 26. In its complaint, Plaintiff asserts that
any payments due to Defendant under the disputed agreements were payable at the latest in
December of 2010. See id. Plaintiff's allegations are supported by the declaration of its chief
executive officer, Edward J. Widdowson, see Dkt. No. 11-1 at 2-9 ¶¶ 5-7, 10, 14, 16-17, and the
payment terms contained in the LTAA and JVA, see id. at 18, 23, 43, 46, 55. To the extent that
Defendant contests the payment schedules presented in Plaintiff's complaint and supporting
affidavits, it has failed to provide any evidence apart from the arguments in its briefs as to why
the purported time-line is inapplicable to the facts of this case. See State Emps. Bargaining Agent
Coal. v. Rowland, 494 F.3d 71, 77 n.4 (2d Cir. 2007) (noting that the court should examine
outside evidence, including affidavits, in determining contested factual arguments as to whether
jurisdiction exists).
11

Defendant further contends that Plaintiff is asserting a hypothetical, unknown statute of
limitations. See Dkt. No. 10 at 23-24. However, the issue of which statute of limitations governs
the underlying contract is easily resolvable by the Court. Since the agreements explicitly state
that they are governed by the laws of the United States, see Dkt. No. 11-1 at 26, 54, this Court
would use established Second Circuit precedent to determine which state's statute of limitations
applies to the instant contract dispute. See, e.g., Glynwill Invs., N.V. v. Prudential Sec., Inc., No.
92 Civ. 9267, 1995 WL 362500, *3 (S.D.N.Y. June 16, 1995) ("A federal court siting in diversity
applies the statute of limitations supplied by the forum state" (citing City of W. Haven v.
Commercial Union Ins. Co., 894 F.2d 540, 544 (2d Cir. 1990)); see also N.Y. C.P.L.R. § 202
(noting that the statute of limitations of another jurisdiction may apply to actions accruing outside
of New York, so long as it imposes a shorter limitation period). Thus, any claims accruing from
the non-payment under the agreements would have a specific accrual time and limitation period
that would allow the Court to definitively rule on Plaintiff's requested relief.
Lastly, Defendant argues that any final decision in this case would be an advisory opinion
because the Court cannot render a judgment with practical utility to the parties on Counts I-III.
See Dkt. No. 10 at 24-25; Dkt. No. 47 at 7-8. This argument is undermined by the declaration of
Plaintiff's CEO that the potential liability to Defendant under these claims is seriously affecting
its ability to conduct business in a profitable manner. Edward J. Widdowson declared that "the
mere presence of [Defendant's] claim has had a severely deleterious effect on [Plaintiff's]
finances" and that the "presence of the unresolved . . . claims has caused [Plaintiff's] lender . . . to
shut off [its] line of credit." Dkt. No. 11-1 at 6 ¶¶ 14, 16. Further, other banks and lenders will
not consider doing business with Plaintiff due to the potential liability from Defendant's claims.
Id. at 6 ¶ 17. This has caused Plaintiff to "shut down its assembly plant in West Chester,
12

[Pennsylvania] and lay off over 100 employees." Id. Thus, if the Court were to grant Plaintiff's
request for declaratory judgment, it would remove this cloud on Plaintiff's finances and allow it to
continue operating its business without the uncertainty of potentially owing Defendant millions of
dollars.
In light of Plaintiff's affirmative declarations outlining the specificity of any potential
future litigation on Counts I-III, the clear language of the JVA and LTAA establishing when
payments were due to Defendant, and the conclusive nature of the relief sought, contrasted with
Defendant's unsupported arguments that any judgment in this case would be advisory and based
on a "hypothetical state of facts," the Court finds that Plaintiff has carried its burden to establish
that the claims presented in its action for a declaratory judgment are ripe for review.
Accordingly, Defendant's motion to dismiss Counts I-III for lack of subject matter jurisdiction is
denied.

b. Discretionary Dismissal
A district court's decision to entertain a declaratory judgment action, assuming that it
otherwise has subject matter jurisdiction over the case, lies within the discretion of that court. See
Dow Jones & Co., Inc. v. Harrods Ltd., 346 F.3d 357, 359 (2d Cir. 2003). The Second Circuit
has stated that a district court may consider the following five factors in exercising its discretion
under the Declaratory Judgment Act: (1) "whether the judgment will serve a useful purpose in
clarifying or settling the legal issues involved"; (2) "whether a judgment would finalize the
controversy and offer relief from uncertainty"; (3) "whether the proposed remedy is being used
merely for 'procedural fencing' or a 'race to res judicata'"; (4) "whether the use of a declaratory
judgment would increase friction between sovereign legal systems or improperly encroach on the

13

domain of a state or foreign court"; and (5) "whether there is a better or more effective remedy."
Id. (citations omitted).
The subject matter jurisdiction analysis discussed above resolved the first two factors in
favor of the Court hearing the instant action. For the third factor, any dispute as to whether this
action was being used for "procedural fencing" or a "race to res judicata" was definitively
addressed by the Eastern District of Pennsylvania's discussion regarding the transfer of the action
to this Court pursuant to the first-filed doctrine. The December 8 Order determined that it was the
case filed by Defendant in this Court, and not the instant action initially filed in Chester County,
Pennsylvania, that established the appropriate venue for this case. See Dkt. No. 32.
For the fourth factor, the language of the agreements at issue clearly indicates the parties'
intent that this Court hear the instant action. Specifically, the LTAA and the JVA both state that
the governing law shall be that of the United States. See Dkt. No. 11-1 at 26, 54. Moreover, to
the extent that this Court's entertaining the action would impinge on the jurisdiction of
Pennsylvania's state courts since the action was initially commenced pursuant to the Pennsylvania
Declaratory Judgment Act, those issues were properly resolved upon Defendant's removal of the
case to the Eastern District of Pennsylvania and subsequent transfer to this Court.
The final factor, whether there is a better or more effective remedy to resolve the instant
dispute, requires a more in-depth analysis in this case. In a separate motion, Defendant is asking
the Court to compel arbitration on Counts I-III pursuant to the Federal Arbitration Act ("FAA").
See Dkt. No. 21. That motion is based upon the language contained in the JVA that
[a]ny disputes, controversies or claims arising out of this
AGREEMENT or the PROJECT which may arise between the
MEMBERS shall be finally submitted to and settled by arbitration
to take place at The Court of Arbitration of the International
Chamber of Commerce, Paris, France in accordance with the Rules
14

of the International Chamber of Commerce. Proceedings shall be
conducted in the English language.
Dkt. No. 11-1 at 54. Likewise, the LTAA contains a clause that states
[a]ny disputes between the parties shall be settled by discussion
between the parties, or, failing this, by referring the matter in
dispute to the decision of a third party acceptable to both parties. In
the case that a third party acceptable to LICENSOR and
LICENSEE cannot be determined or if the third party is unable to
reach a decision, the matter may be settled by an appropriate court
of law.
Id. at 28. If the arbitration clauses in these agreements are binding upon the claims presented in
Plaintiff's complaint, then submitting this issue to arbitration may be a more appropriate remedy
than the Court deciding the declaratory judgment action. See Smith v. Metro. Prop. & Liab. Ins.
Co., 629 F.2d 757, 759-60 (2d Cir. 1980). However, neither party addressed the possibility of the
claims being submitted to arbitration in their briefs on the instant motion to dismiss. The issue of
whether this case should be sent to arbitration is not clear-cut, as evidenced by the parties'
submissions of seven separate briefs, totaling over 90 pages plus numerous declarations and
exhibits, that argue each side's position on the issue. See Dkt. Nos. 21, 22, 26, 29, 47, 52, 60.
With the limited evidence before the Court on this motion to dismiss, and without fully deciding
the subsequent motion to compel arbitration, the Court cannot conclude that arbitration is a more
appropriate remedy to resolve the claims set forth in Plaintiff's complaint.4 Accordingly, based

The Court notes that if it finds that the FAA mandates arbitration in this case after
considering Defendant's motion to compel arbitration, then it must stay rather than outright
dismiss Plaintiff's underlying action for declaratory judgment. See Katz v. Cellco P'ship, 794
F.3d 341, 347 (2d Cir. 2015) (rejecting the argument that a district court may dismiss a claim
pending arbitration and "conclud[ing] that the text, structure, and underlying policy of the FAA
mandate a stay of proceedings when all of the claims in an action have been referred to arbitration
and a stay requested").
4

15

upon a balance of the factors discussed herein, the Court denies Defendant's request to dismiss
Counts I-III on a discretionary basis.

2. Count IV
Count IV of Plaintiff's complaint asks the Court to declare that "all claims that
[Defendant] has, had or could have had, for payments under the MOU [are] barred by the statute
of limitations." Dkt. No. 1 at 18-19. In the related, first-filed action brought by Defendant
seeking payments for amounts due under the MOU, Plaintiff's first affirmative defense argues that
Defendant's "claims are barred in whole or in part by the applicable statute of limitations[,]
including but not limited to [the] statute of limitations of the state in which the cause of action
accrued." Case No. 3:15-cv-505, Dkt. No. 38 ¶ 26. Thus, Plaintiff is asking the Court to
determine the same legal questions in both pending cases. Accordingly, Count IV of Plaintiff's
complaint is dismissed as duplicative of its affirmative defense in the first-filed case. See
Campbell v. Sposato, No. 15-CV-1958, 2015 WL 3648624, *2 (E.D.N.Y. June 8, 2015) ("The
Second Circuit has long adhered to the first-filed doctrine in deciding which case to dismiss
where there are competing litigations" (quotation and citations omitted)).

IV. CONCLUSION
After carefully reviewing the entire record in this matter, the parties' submissions and the
applicable law, and for the above-stated reasons, the Court hereby
ORDERS that Defendant's motion to dismiss (Dkt. No. 10) is DENIED as to Counts I, II,
and III of Plaintiff's complaint and GRANTED as to Count IV; and the Court further
ORDERS that Count IV of Plaintiff's complaint is DISMISSED; and the Court further

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ORDERS that Defendant's request to transfer the action is DENIED as moot; and the
Court further
ORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision
and Order on all parties in accordance with the Local rules.
IT IS SO ORDERED.
Dated: March 18, 2016
Albany, New York

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