Nutrition & Fitness, Inc. v. Progressive Emu, Inc. et al

Filing 31

ORDER STAYING CASE. NFI is DIRECTED to submit a status report of the Alabama proceedings no later than sixty (60) days from the filing date of this order, and every sixty (60) days thereafter, until such proceedings are concluded. The Clerk of Court is DIRECTED to remove this case from the active docket. Signed by Senior Judge James C. Fox on 6/7/2012. (Edwards, S.)

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NORTH CAROLINA

WESTERN DIVISION

No.5:12-CV-192-F

NUTRITION & FITNESS, INC.,
Plaintiff,

v.
PROGRESSIVE EMU, INC. and
CHRIS BINKLEY,
Defendants.

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ORDER

This matter came before the court for a hearing on the Motion to Dismiss or Transfer [DE­
20] and the Motion for Reconsideration [DE-22] filed by Progressive Emu, Inc. and Chris Binkley
(hereinafter individually referred as "Pro Emu" or "Binkley" or collectively referred as
"Defendants"). The hearing concluded with the court finding that this case falls squarely within the
purview of the first-filed rule. Hence, the suit before this court was stayed to allow the court in the
Northern District of Alabama to decide the appropriate forum and whether an exception to the firstfiled rule is applicable. This order memoralizes and clarifies the ruling.

I. PROCEDURAL BACKGROUND
On March 28, 2012, Pro Emu first filed suit against Nutrition & Fitness, Inc. ("NFl") in
Alabama state court alleging breach of contract and seeking a declaratory judgment for certain
intellectual property rights and the buying and selling of emu oil. On April 10, 2012, NFl removed
this case to federal court in the Northern District of Alabama. Exactly one day later, on April 11,

2012, NFl filed suit in this court against Pro Emu and added Chris Binkley ("Binkley") as a party
to the litigation alleging breach of contract, breach of covenant of good faith and fair dealing, unfair
trade practices, tortious interference with contracts and business relations, and a declaratory
judgment for certain intellectual property rights. These claims all relate back to the contract that is
currently also in dispute in Alabama.
On April 23, 2012, NFl filed the Motion for Temporary Restraining Order, Preliminary
Injunction, and Expedited Discovery [DE-ll] in this court. Two days later, on April 25, 2012, NFl
filed the Motion for Extension ofTime to File Responsive Pleadings in Alabama. On May 1, 2012,
a status conference was held in regards to the Motion for Extension of Time to File Responsive
Pleadings. A review of the Alabama docket indicates that, by agreement of the parties, the motion
was granted in part. On the same day, NFl filed the Motion to Remand in Alabama, which was
subsequently denied on May 3,2012.
On April 27, 2012, this court denied NFl's request for a temporary restraining order, but
allowed expedited discovery, and set a hearing on the motion for preliminary injunction on May 29,
2012. Defendants, on May 4,2012, filed the Motion to Dismiss or Transfer Venue [DE-20] in this
court. Pursuant to Rule 12(b)(2) and 12(b)(6) ofthe Federal Rules of Civil Procedure, Defendants
contend that this case should be dismissed because (1) this court does not have personal jurisdiction
over Pro Emu and Binkley; (2) Plaintiff sued Binkley, the CEO of Pro Emu, but failed to assert any
allegations against Binkley; and (3) Plaintiff fails to state a claim for which relief can be allowed.
In the alternative, Defendants claims that this case should be transferred to Alabama pursuant to the
first-filed rule.
On May 10, 2012, NFl filed the Motion to Dismiss or Transfer Venue in Alabama. On May

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14,2012, Defendants filed the Motion for Reconsideration [DE-22] of this court's order allowing
expedited discovery. Defendants claimed that the action before this court was due to be dismissed,
stayed, or transferred because the court lacks personal j urisdiction and there is a prior pending action.
On May 25,2012, the court held a hearing on the Motion to Dismiss or Transfer Venue [DE­
20] and the Motion for Reconsideration [DE-22]. The court tailored the hearing to address the
limited issue of whether this case should be stayed or transferred pursuant to the first-filed rule. l
At the conclusion ofthe hearing, the court found that the first-filed rule is applicable. Therefore, the
court stayed the proceedings to allow the court in the Northern District of Alabama to decide the
appropriate forum and whether an exception to the first-filed rule is applicable. 2

II. DISCUSSION
As a general rule, when the same parties pursue similar litigation in two separate federal
courts, the principle of comity dictate that the case should proceed where the action was first-filed.
See Ellicot Mach. Corp. v. Modern Welding Co., Inc., 502 F.2d 178,180 n.2 (4th Cir. 1974); see also
Pacesetter Systems, Inc. v. Medtronic, Inc., 678 F.2d 93,94-5 (9th Cir. 1982) (stating that "[t]here

is a generally recognized doctrine of federal comity which permits a district court to decline
jurisdiction over an action when a complaint involving the same parties and issues has already been

1 The court notes that although personal jurisdiction is typically detennined before venue, when sound
justification exists to do so, a court may consider venue first. See, e.g., Leroy v. Great W United Corp., 443 U.S.
173, 180 (1979). Here, even though Defendants are contending that this court lacks personal jurisdiction, the court
finds that it is appropriate to address the issue of venue first, namely, whether the first-filed rule is applicable.
2 At the May 25, 2012, hearing, the court queried NFl as to why no notification was provided as to the
pending case in Alabama. NFl responded that it had indeed disclosed such fact on the civil cover sheet submitted
with the original complaint filed April 11,2012. However, in the civil cover sheet, NFl notated that an Alabama
state case was pending that may be related to the suit before this court. However, a day before the current suit was
filed in this court, the case in Alabama had already been removed to federal court. At bottom, NFl provided no
notice that a federal case regarding the same contract was pending in Alabama. In fact, NFl made no mention of
such parallel federal suit when it filed the Motion for Temporary Restraining Order, Preliminary Injunction, and
Expedited Discovery [DE-II]. NFl claimed at the hearing that such non-disclosure was a mere "oversight."

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filed in another district."). This doctrine is known as the first-filed rule and "give[s] priority, for
purposes of choosing among possible venues when parallel litigation has been instituted in separate
courts, to the party who first establishes jurisdiction. Northwest Airlines, Inc. v. American Airlines,
Inc., 989 F.2d 1002, 1006 (8th Cir. 1993). In fact, the Fourth Circuit has held that when similar

lawsuits are filed in multiple federal forums, the first-filed suit should have priority absent the
showing ofbalance ofconvenience in favor ofthe second action. Volvo Constr. Equip. N. Am., Inc.,
v. CLM Equip. Co., Inc., 386 F.3d 581, 594-95 (4th Cir. 2004).
In determining whether the first-filed rule is applicable, the court must examine the (1)
chronology ofthe filings; (2) similarity ofthe parties involved; and (3) similarity ofthe issues being
raised. Remington Arms. Co., Inc. v. Alliant Techsystems, Inc., 2004 WL 444574, *2 (M.D.N.C.
Feb. 25,2004). However, there are circumstances under which an exception to the first-filed rule
may be applicable. For instance, the Fourth Circuit finds an exception to the first-filed rule when
the balance ofconvenience weighs in favor ofthe second forum. ld. (citing Learning Network, Inc.
v. Discovery Communications, Inc., No. 01-1202, 2001 WL 627618, at *3 (4th Cir. June 7, 2001)
(unpublished». Moreover, older precedent in the Fourth Circuit suggests an exception to the first­
filed rule under special circumstances which includes anticipatory filings. See e.g., Aetna Cas. &
Sur. Co. v. Quarles, 92 F.2d 321, 324 (4th Cir. 1937) (stating that courts should decline to exercise

jurisdiction over actions seeking declaratory judgment filed "for the purpose ofanticipating the trial
of an issue in a court of [co ]ordinate jurisdiction."). In addition, special circumstances may also
encompass instances where an action was filed in the midst of settlement negotiations. Remington,
2004 WL 444574 at *2.
Here, a close examination ofthe actions currently pending in North Carolina and Alabama
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suggest that both litigations are sufficiently similar for the first-filed rule to be applicable. First, both
suits were filed in close proximity to each other as Pro Emu filed its action against NFl on March
28,2012 in Alabama, while NFl filed suit against Pro Emu and Binkley on April 11, 2012 in North
Carolina. Second, the parties involved in both litigations are nearly identical. The suit before this
court has added Binkley as a Defendant, but his presence in the lawsuit does not change the
gravamen of the dispute. Finally, the claims are also similar. Pro Emu, in the Alabama complaint,
alleges breach ofcontract and seeks a declaratory judgment regarding various rights associated with
the selling ofemu oil and certain intellectual property rights. NFl, in its complaint filed in this court,
has alleged claims of breach of contract, breach of covenant of good faith and fair dealing, unfair
trade practices, tortious interference, and seeks a declaratory judgment of certain intellectual
property. Although NFl's complaint includes several additional claims, the presence ofthese claims
does not mean that the cases are so dissimilar as to avoid the application of the first-filed rule. See
id. Ultimately, both litigations involve each parties' purported rights under the same contract that
is the centerpiece of both suits. Accordingly, the court finds that the first-filed rule is applicable.
The suit before this court is STAYED to allow the court in the Northern District of Alabama to
decide the appropriate forum and whether an exception to the first-filed rule is applicable.
III. CONCLUSION

Based on the aforementioned rationale, this case is STAYED to allow the court in the
Northern District of Alabama to decide the appropriate forum and whether an exception to the first­
filed rule is applicable. Furthermore, NFl is DIRECTED to submit a status report of the Alabama
proceedings no later than sixty (60) days from the filing date ofthis order, and every sixty (60) days
thereafter, until such proceedings are concluded. The Clerk of Court is DIRECTED to remove this

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case from the active docket.
SO ORDERED.
This the 7th day of June, 2012.

J
ES C. FOX
Senior United States District Judge

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