Cooper & Elliott v. Estate of Stephen Popovich
Filing
26
ORDER granting 4 Motion to Dismiss or transfer. The Court DISMISSES this case WITHOUT PREJUDICE. The Clerk shall enter final judgment in favor of Defendant, and against Plaintiff, dismissing this case without prejudice. Signed by Judge Algenon L. Marbley on 6/18/2015. (cw)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
Cooper & Elliot,
Plaintiff,
v.
The Estate of
Stephen C. Popovich,
Case No. 2:14–cv–505
Judge Algenon L. Marbley
Defendant.
OPINION AND ORDER
Plaintiff law firm Cooper and Elliot, LLC (“Cooper & Elliot”), bring this diversity
action against Defendant the Estate of Stephen C. Popovich (“Estate”), seeking a
declaratory judgment that it is entitled to receive 33 1/3 percent of the entire amount paid
by Sony Music Entertainment (“Sony”) in the November 2012 settlement and that Cooper
& Elliot’s representation of the Estate in connection with the settlement complied with all
applicable standards of care. The Estate moves to dismiss on the ground that this lawsuit
is an anticipatory filing in an attempt to forum shop, the Court should decline to exercise
jurisdiction over this declaratory judgment action or, in the alternative, transfer this action
to the United States District Court for the Northern District of Ohio, where the Estate
filed a lawsuit against Cooper & Elliot shortly after Cooper & Elliot filed the instant case.
For the following reasons, the Court GRANTS the Estate’s motion to dismiss.
I. BACKGROUND
This action arises from Cooper & Elliot’s representation of the Estate in disputes
with Sony concerning royalties Sony owed to the decedent’s company, Cleveland
Entertainment Company (“CEC”). The Estate settled its remaining lawsuit against Sony
in the Fall of 2012. The settlement had two components:
(1) Sony’s payment of unpaid royalties to the Estate, and (2) Sony’s purchase of, inter
alia, the Estate’s interest in future royalty and logo rights as well as interests in certain
music.
The nub of the parties’ dispute is this: the Estate asserts Cooper & Elliot was
entitled to, at most, it’s 33 and 1/3% contingency fee only from the amount of settlement
proceeds attributable to the first component, unpaid royalties. Cooper & Elliot, on the
other hand, maintains that it is entitled to 33 and 1/3 percent of the total amount of the
settlement proceeds, i.e., the sum of both components.
A Tennessee state probate court has jurisdiction over the Estate. On May 13,
2014, the Estate filed a motion in the probate action seeking the court’s permission to
pursue a potential claim against Cooper & Elliot. The motion raised questions about
whether Cooper & Elliot’s contingency fee should have been calculated on the basis of
the gross settlement or a lesser amount. In addition, the motion indicated that if the
contingency fee should have been calculated on a lesser amount, the administrator of the
Estate might have a duty to bring a malpractice or breach of contract claim against
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Cooper & Elliot.
Cooper & Elliot denies that it breached its contract with the Estate or committed
malpractice. It avers that the October 2011 contingency fee agreement with the Estate
provided that it would receive 33 and 1/3 percent of the entire amount paid by Sony.
No later than May 22, 2014, Cooper & Elliot was aware of the Tennessee probate
court’s intent to authorize the Estate to engage counsel to seek recourse against Cooper &
Elliot, as evidenced by an affidavit Cooper & Elliot filed in a New York state court action
against CEC. The affidavit refers to irreconcilable differences between the Estate and
Cooper & Elliot in the Tennessee probate case. Rex H. Elliot Aff. ¶ 2 (copy), ECF No. 42. Elliot indicated that the dispute concerned the settlement and stated that the Estate had
taken adversarial action against Cooper & Elliot in the probate matter. Id. It is
undisputed that on May 27, 2014, the Tennessee probate court authorized the Estate to
retain counsel and pursue legal action against Cooper & Elliot.
Two days later, on May 29, 2014, Cooper & Elliot filed the instant declaratory
judgment action in this Court. The Estate filed its own coercive lawsuit against Cooper &
Elliot in the United State District Court for the Northern District of Ohio on June 10,
2014. Estate of Stephen C. Popovich v. Rex Elliot, et al., Case No. 1:14–cv–1254. The
Estate now asks this Court to dismiss the instant lawsuit as an improper anticipatory
action or decline to exercise jurisdiction over this declaratory judgment action. In the
alternative, the Estate requests that the Court transfer this case to the Northern District of
Ohio.
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II. DISCUSSION
The Estate argues that the Court should dismiss this lawsuit on the ground that
Cooper & Elliot filed it in anticipation that the Estate would soon file its own action
against Cooper & Elliot. In that regard, the Estate contends that the first-to-file rule does
not apply because the filing of this lawsuit was anticipatory. Cooper & Elliot assert that
the first-to-file rule applies, and the Court should therefore decline to dismiss the instant
case.
The first-to-file rule, . . . is a “well-established doctrine that encourages comity
among federal courts of equal rank.” AmSouth Bank v. Dale, 386 F.3d 763,
791 n. 8 (6th Cir. 2004) (quoting Zide Sport Shop of Ohio v. Ed Tobergte
Assoc., Inc., 16 F. App’x 433, 437 (6th Cir. 2001) (unpublished)) (emphasis
altered). “The rule provides that when actions involving nearly identical
parties and issues have been filed in two different district courts, ‘the court in
which the first suit was filed should generally proceed to judgment.’” Zide
Sport Shop, 16 F. App’x at 437 (quoting In re Burley, 738 F.2d 981, 988 (9th
Cir. 1984)) (emphasis added). However, “the first-filed rule is not a strict rule
and much more often than not gives way in the context of a coercive action
filed subsequent to a declaratory judgment.” AmSouth Bank, 386 F.3d at 791
n. 8. As we have previously explained:
District courts have the discretion to dispense with the
first-to-file rule where equity so demands. A plaintiff, even one
who files first, does not have a right to bring a declaratory
judgment action in the forum of his choosing. Factors that weigh
against enforcement of the first-to-file rule include extraordinary
circumstances, inequitable conduct, bad faith, anticipatory suits,
and forum shopping.
Zide Sport Shop, 16 F. App’x at 437 (internal citations omitted) (emphasis
added). “Cases construing the interplay between declaratory judgment actions
and suits based on the merits of underlying substantive claims create, in
practical effect, a presumption that a first filed declaratory judgment action
should be dismissed or stayed in favor of the substantive suit.” AmSouth Bank,
386 F.3d at 791 n. 8 (quoting UAW v. Dana Corp., No. 3:99CV7603, 1999
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WL 33237054, at *6 (N.D. Ohio Dec.6, 1999)).
Certified Restoration Dry Cleaning Network, L.L.C. v. Tenke Corp., 511 F.3d 535,
758–59 (6th Cir. 2007).
Here, the instant lawsuit is one for declaratory judgement. Consequently, under
Certified Restoration, a presumption exists that this case should be dismissed in favor of
the substantive lawsuit that the Estate filed in the Northern District of Ohio. The Court
concludes that Cooper & Elliot have not rebutted that presumption.
The circumstances surrounding Cooper & Elliot’s filing of the instant complaint
strongly suggest that the filing was preemptive. Specifically, the sequence and timing of
events indicate that Cooper & Elliot was well aware of an impending substantive action
against it by the Estate and filed this anticipatory suit in the more convenient forum.
First, the Tennessee probate court ordered Cooper & Elliot to deposit the disputed
fees with the probate court. Cooper & Elliot declined to do so. In addition, Cooper &
Elliot filed an affidavit in an action pending in a New York state court in support of a
motion to withdraw as counsel for the Estate, indicating that irreconcilable differences
had arisen between it and the Estate in the probate case concerning Cooper & Elliot’s
representation of the Estate in the settlement. Rex H. Elliot Aff. ¶ 2 (copy), ECF No. 4-2.
Next, on May 27, 2014, the Tennessee Probate Court authorized the Estate to
retain legal counsel to investigate the claims the Estate has against Cooper & Elliott and
to commence a civil lawsuit to recover any damages the Estate suffered as a result of
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Cooper & Elliott’s legal representation. Cooper and Elliot then filed the instant
declaratory judgment action in this Court on May 29, 2014, only two days after the
Tennessee probate court granted the Estate leave to proceed against Cooper & Elliot.
Notably, Cooper & Elliot filed the instant lawsuit only one week after the filing of
the affidavit in the New York case and only two days after the probate court gave its
authorization for the Estate to sue Cooper & Elliot. The timing of these events strongly
suggests that the present lawsuit was anticipatory in nature. Add to that, a presumption
already exists that the Court should dismiss this action because it is one for declaratory
judgment and the second lawsuit is substantive. See Certified Restoration, 511 F.3d at
759. Given the circumstances surrounding the filing of the present matter, and the
presumption, the Court declines to apply the first-to-file rule in favor of Cooper & Elliot
and will instead defer to the United States District Court for the Northern District of Ohio.
Cooper & Elliot attempt to avoid this conclusion by arguing that when a
declaratory judgment action is filed first in a venue closely related to the underlying
dispute, the first-to-file rule applies notwithstanding facts suggesting the lawsuit was
anticipatory in nature. In support of that assertion, Cooper & Elliot distinguish the instant
case from one cited by the Estate, Int’l Union, UAW v. Dana Corp., No. 3:99–cv–7603,
1999 WL 33237054, at *2–5 (N.D. Ohio Dec. 3, 1999). First, distinguishing one district
court decision upon which the Estate relies does not equate to affirmative authority that
the first-to-file rule applies whenever venue is proper notwithstanding that the first
lawsuit is a preemptive declaratory judgment action. Second, as the Estate correctly
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notes, the court in Int’l Union did not rest its decision on the fact that the first lawsuit was
filed in a forum with little connection to the parties’ dispute. See id., 1999 WL 33237054,
at *5. Indeed, the court merely rejected an argument that the first filing party raided. See
id. The court gave no indication that the result would have been different if venue had
been proper in the first lawsuit. See id.
In short, the fact that venue might be proper in this Court does not excuse the fact
that it was filed preemptively. Consequently, the passing reference to the location of
witnesses and documents in Int’l Union does not alter this Court’s conclusion that the
first-to-file rule does not apply.
Having reached this conclusion, there is no need for the Court to address the
Estate’s other ground for dismissal or its alternative motion to transfer venue. This Court
makes clear that this decision has no bearing on the final determination of the proper
venue for the underlying claims in both Cooper & Elliot and the Estate’s claims. If
Cooper & Elliot have grounds to argue for transfer of venue to the Southern District in the
case the Estate brought in the Northern District, they are free to argue for transfer in that
case.
III. DISPOSITION
For the above reasons, the Court GRANTS the Estate’s motion to dismiss or
transfer. ECF. No. 4. The Court DISMISSES this case WITHOUT PREJUDICE.
The Clerk shall enter final judgment in favor of Defendant, and against Plaintiff,
dismissing this case without prejudice.
Case No. 2:14–cv–505
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The Clerk shall remove ECF No. 4 from the Civil Justice Reform Act motions
report.
IT IS SO ORDERED.
/s/ Algenon L. Marbley
ALGENON L. MARBLEY
UNITED STATES DISTRICT JUDGE
DATED: June 18, 2015
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