Sommery Lot 2 LP v. Sommery Round Rock TX, LLC

Filing 38

REPORT AND RECOMMENDATIONS re 6 Motion to Transfer Case, filed by Sommery Round Rock TX, LLC. Signed by Judge Dustin M. Howell. (pg)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
SOMMERY LOT 2 LP,
Plaintiff
v.
SOMMERY ROUND ROCK TX,
LLC,
Defendant

§
§
§
§
§
§
§
§

No. 1:23-cv-01442-RP

REPORT AND RECOMMENDATION
OF THE UNITED STATES MAGISTRATE JUDGE
TO:

THE HONORABLE ROBERT PITMAN
UNITED STATES DISTRICT JUDGE
Before the Court is Defendant Sommery Round Rock TX, LLC’s Motion to

Transfer Pursuant To The First-to-File Rule Or, Alternatively, To Dismiss Pursuant
To Federal Rule of Civil Procedure 12(b)(6). Dkt. 6. After reviewing the associated
briefing and relevant caselaw, the undersigned recommends that the motion be
granted.
I.

BACKGROUND

This case is about a dispute over the purchase of property. Plaintiff Sommery
Lot 2 LP entered a Purchase and Sale Agreement (“PSA”) with Sommery Round Rock
for the sale of a piece of property in Williamson County, Texas. Dkt. 4, at 2. 1 Section
3 of the PSA required Sommery Round Rock to deliver $2,500,000 (the “Initial
Given the procedural posture of this dispute, the undersigned accepts all of Sommery Lot
2’s well-pleaded facts as true. See Davis v. Tarrant Cnty., Tex., 565 F.3d 214, 217 (5th Cir.
2009) (“In ruling on a motion to dismiss, a court accepts all well-pleaded facts as true, viewing
them in the light most favorable to the plaintiff.”) (internal quotation marks omitted).
1

1

Earnest Money”) to an Escrow Agent. Sommery Round Rock timely deposited the
Initial Earnest Money, and the parties had amicable dealings for over a year. Id. at
2-3.
On September 1, 2023, Sommery Lot 2 designated the closing to occur fortyfive days later, October 16, 2023. Id. at 3. 2 Sommery Lot 2 alleges that Sommery
Round Rock, without notice or explanation, failed to appear at the offices of the
Escrow Agent on the closing date and failed to deliver funds and execute the
documents required under Section 8(a) of the PSA to consummate the purchase of the
property. Id. at 4. Sommery Lot 2 further alleges that this constituted a “material
default” under Section 11(a) of the PSA. Id. Consequently, on October 17, 2023,
Sommery Lot 2 terminated Sommery Round Rock’s rights under the PSA through
written notice and instructed the Escrow Agent to deliver the Initial Earnest Money
to Sommery Lot 2. Id. at 5. Sommery Round Rock has instructed the Escrow Agent
to not release the Initial Earnest Money to Sommery Lot 2. Id. at 5.
On October 13, 2023, the Friday before the Designated Closing Date, Sommery
Round Rock filed a lawsuit in New York state court, 3 alleging breach of the PSA and
seeking release of the earnest money. Id. at 5. On October 19, 2023, Sommery Lot 2

Section 8 of the PSA provides that “the closing … of the sale of the Property by Seller to
Purchaser shall occur … on that date … that is on or about forty-five (45) days following
Seller’s receipt … of temporary and/or final certificates of occupancy.” Dkt. 6-1, at 16-17.
Section 21 of the PSA, entitled “Time of Essence,” provides that “any date for performance or
expiration of a relevant time period hereunder, that falls on a day that is not a business day
in Texas, will be extended to the next business day thereafter.” Id. at 27.
3 The case was later removed to the Eastern District of New York (Civil Action No. 2:23-cv8522-NRM-LGD, hereinafter, the “New York Court” and “New York Action”).
2

2

filed suit in Texas state court, 4 also asserting breach of the PSA and release of the
earnest money. Dkt. 1-3. On January 2, 2024, Sommery Round Rock filed this Motion
to Transfer, Dkt. 6, now before the undersigned for consideration.
II.
A.

LEGAL STANDARDS

Motion to Transfer

“Under the first-to-file rule, when related cases are pending before two federal
courts, the court in which the case was last filed may refuse to hear it if the issues
raised by the cases substantially overlap.” Cadle Co. v. Whataburger of Alice, Inc.,
174 F.3d 599, 603 (5th Cir. 1999). “The first-to-file rule is a discretionary doctrine
that rests on principles of comity and sound judicial administration, animated by the
concern to avoid the waste of duplication, to avoid rulings which may trench upon the
authority of sister courts, and to avoid piecemeal resolution of issues that call for a
uniform result.” Kolb v. Conifer Value-Based Care, LLC, No. 3:23-CV-744-E-BN, 2023
WL 8244293, at *2 (N.D. Tex. Nov. 27, 2023) (quoting Cadle Co., 174 F.3d at 603)
(internal quotation marks omitted).
B.

Motion to Dismiss

Pursuant to Rule 12(b)(6), a court may dismiss a complaint for “failure to state
a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). In deciding a
12(b)(6) motion, a “court accepts ‘all well-pleaded facts as true, viewing them in the
light most favorable to the plaintiff.’” In re Katrina Canal Breaches Litig., 495 F.3d
191, 205 (5th Cir. 2007) (quoting Martin K. Eby Constr. Co. v. Dall. Area Rapid
The case was later removed to this Court (Civil Action No. 1:23-cv-01442-RP, hereinafter,
the “Texas Court” and “Texas Action”).
4

3

Transit, 369 F.3d 464, 467 (5th Cir. 2004)). “To survive a Rule 12(b)(6) motion to
dismiss, a complaint ‘does not need detailed factual allegations,’ but must provide the
plaintiff’s grounds for entitlement to relief—including factual allegations that when
assumed to be true ‘raise a right to relief above the speculative level.’” Cuvillier v.
Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007)). That is, “a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).
A claim has facial plausibility “when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. “The tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal conclusions. Threadbare
recitals of the elements of a cause of action, supported by mere conclusory statements,
do not suffice.” Id. A court ruling on a 12(b)(6) motion may rely on the complaint, its
proper attachments, “documents incorporated into the complaint by reference, and
matters of which a court may take judicial notice.” Dorsey v. Portfolio Equities,
Inc., 540 F.3d 333, 338 (5th Cir. 2008) (citations and internal quotation marks
omitted). A court may also consider documents that a defendant attaches to a motion
to dismiss “if they are referred to in the plaintiff’s complaint and are central to her
claim.” Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004).
But because the court reviews only the well-pleaded facts in the complaint, it may
not consider new factual allegations made outside the complaint. Dorsey, 540 F.3d at

4

338. “[A] motion to dismiss under 12(b)(6) ‘is viewed with disfavor and is rarely
granted.’” Turner v. Pleasant, 663 F.3d 770, 775 (5th Cir. 2011) (quoting Harrington
v. State Farm Fire & Cas. Co., 563 F.3d 141, 147 (5th Cir. 2009)).
III.

DISCUSSION

Sommery Round Rock moves to transfer this case to the New York Court
pursuant to the first-to-file rule. Dkt. 6. Alternatively, Sommery Round Rock moves
to dismiss the action pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing
that it did not breach the PSA as a matter of law. Id. Because the undersigned
recommends granting the motion to transfer, there is no need to consider the motion
to dismiss.
A.

Anticipatory Filing Exception

Sommery Round Rock filed its suit in New York on October 13, 2023, which is
before Sommery Lot 2 filed its suit in Texas on October 19, 2023. 5 Accordingly, the
first-to-file rule would typically counsel that this Court should transfer the
subsequently filed case to New York. “Under the first-to-file rule, when related cases
are pending before two federal courts, the court in which the case was last filed may
refuse to hear it if the issues raised by the cases substantially overlap.” Cadle Co.,
174 F.3d at 603. The rule exists “to avoid the waste of duplication, to avoid rulings
which may trench upon the authority of sister courts, and to avoid piecemeal

“[T]he relevant date for purposes of the first-to-file rule is the date the case was originally
filed in state court, not the date the case was removed to federal court.” KAL Drilling, Inc. v.
Star of Tex. Energy Services Inc., No. A-07-CA-319 LY, 2007 WL 9701456, at *2 (W.D. Tex.
Aug. 24, 2007), report and recommendation adopted, No. A-07-CA-319-LY, 2007 WL 9701458
(W.D. Tex. Oct. 11, 2007).
5

5

resolution of issues that call for a uniform result.” W. Gulf Mar. Ass’n v. ILA Deep Sea
Local 24, S. Atl. & Gulf Coast Dist. of ILA, AFL-CIO, 751 F.2d 721, 729 (5th Cir.
1985).
There is no dispute that the issues raised in the New York and Texas cases
substantially overlap. Both cases allege breaches of the same PSA and seek
ownership of the same $2,500,000 in earnest money. Courts in this circuit have found
substantial overlap when faced with similar circumstances. See Walsh v. Peterson,
No. 4:21-CV-867, 2022 WL 3088086, at *3 (E.D. Tex. Aug. 3, 2022) (finding
substantial overlap where two causes of action alleged similar ERISA violations). See
also White v. Peco Foods, Inc., 546 F. Supp. 2d 339, 343 (S.D. Miss. 2008) (finding
substantial overlap in multiple actions alleging overtime violations of the FLSA).
Moreover, Sommery Round Rock alleges that Sommery Lot 2 has conceded that the
actions substantially overlap, which Sommery Lot 2 does not rebut. See Dkt. 6, at 7
(“Indeed, Plaintiff has judicially admitted that the actions substantially overlap.”)
(emphasis omitted).
Sommery Lot 2 argues that the first-to-file rule does not apply because
Sommery Round Rock’s New York Action was an “anticipatory filing.” Dkt. 8, at 9.
“[S]everal courts in the Fifth Circuit have concluded that an anticipatory suit
initiated for the purpose of obtaining a favored forum constitutes a compelling
circumstance that justifies a deviation from the first-to-file rule.” Twin City Ins. Co.
v. Key Energy Services, Inc., No. CIV A H-09-0352, 2009 WL 1544255, at *5 (S.D. Tex.
June 2, 2009); see also Epic Tech, LLC v. Arno Res., LLC, No. 1:20-CV-577-LY, 2020

6

WL 5351078, at *7 (W.D. Tex. Sept. 4, 2020), report and recommendation adopted,
No. 1:20-CV-577-LY, 2021 WL 2431340 (W.D. Tex. Jan. 11, 2021) (finding that
lawsuit was filed in anticipation of other lawsuit in an attempt to deprive the “true
plaintiff” of its chosen forum, and therefore refusing to apply the first-to-file rule).
Sommery Lot 2 contends that Sommery Round Rock’s conduct before filing suit
demonstrates that its New York Action was an anticipatory filing. See Paragon
Indus., L.P. v. Denver Glass Mach., Inc., No. CIV.A. 3-07CV2183-M, 2008 WL
3890495, at *4 (N.D. Tex. Aug. 22, 2008) (“In determining whether a suit is
anticipatory, courts scrutinize the parties’ activities prior to filing of a suit. Courts
will generally not allow a party to select its preferred forum by filing an action for a
declaratory judgment when it has notice that another party intends to file suit
involving the same issues in a different forum.”). Sommery Lot 2 argues that
Sommery Round Rock “stayed silent about the existence of any particular [Sommery
Lot 2] defaults under the PSA, or any other objection to the Closing Date, until filing
suit on October 13 (three days before the Closing Date), and even then, failed to notify
Seller of the existence of the NY Suit or the declaratory relief sought therein until
after its time to perform had come and gone.” Dkt. 7, at 10-11.
But merely staying silent about a breach of contract is not the sort of conduct
that the anticipatory filing exception was meant to exclude from the first-to-file rule.
Instead, “the primary reason courts have recognized the anticipatory suit exception
to the first-to-file rule is to avoid penalizing a party that has attempted to settle a
dispute out of court.” Twin City Ins., 2009 WL 1544255, at *5; see also, e.g., Johnson

7

Bros. Corp. v. Int’l Broth. of Painters, 861 F. Supp. 28, 29-30 (M.D. La. 1994) (refusing
to apply first-to-file rule where first lawsuit was filed during settlement negotiations).
This Court’s decision in Epic Tech provides a useful guide. There, several
gaming companies had a contract dispute. 2020 WL 5351078, at *1. Arno Resources,
LLC sent pre-suit demand letters to Epic Tech, LLC and Winter Sky, LLC, noting
that counsel planned to file suit in the Northern District of Georgia and was
authorized “to discuss potential settlement possibilities with all parties before filing
suit in an effort to resolve this matter pre-suit.” Id. at *2. Three days later, Epic Tech
and Winter Sky filed suit in Texas. Id. Arno moved to dismiss under the anticipatoryfiling exception, arguing that Epic Tech and Winter Sky “improperly filed this action
to deprive Arno of its chosen [forum].” Id. at *3. This Court agreed and dismissed the
action. Id. at *7.
Sommery Lot 2 never sent Sommery Round Rock a pre-suit demand letter or
engaged in settlement negotiations. Accordingly, the primary rationale for the
anticipatory filing exception does not apply. See Twin City Insurance, 2009 WL
1544255, at *5. Moreover, adopting Sommery Lot 2’s proposed rule—that anytime a
party files a declaratory action without warning, the anticipatory filing exception
applies—would lead to unworkable results. Indeed, “[d]eclaratory judgment actions
are intrinsically anticipatory in nature.” Kinetic Concepts, Inc. v. Connetics Corp., No.
CIV.A.SA-04-CA0237XR, 2004 WL 2026812, at *3 (W.D. Tex. Sept. 8, 2004). The
undersigned does not agree with Sommery Lot 2 that bringing a declaratory action

8

for an alleged breach of contract inherently constitutes an anticipatory filing for
purposes of the first-to-file rule.
Accordingly, the undersigned rejects Sommery Lot 2’s argument that the
anticipatory-filing exception to the first-to-file rule applies here. The undersigned will
next consider Sommery Lot 2’s argument that 28 U.S.C. § 1404(a)’s convenience
factors dictate that the Western District of Texas is nonetheless the proper forum.
B.

28 U.S.C. § 1404(a)

28 U.S.C. § 1404(a) provides that “[f]or the convenience of parties and
witnesses, in the interest of justice, a district court may transfer any civil action to
any other district or division where it might have been brought or to any district or
division to which all parties have consented.” The convenience factors to consider
under § 1404(a) are divided into private-interest factors and public-interest factors.
“The private interest factors are: (1) the relative ease of access to sources of proof;
(2) the availability of compulsory process to secure the attendance of witnesses;
(3) the cost of attendance for willing witnesses; and (4) all other practical problems
that make trial of a case easy, expeditious and inexpensive.” In re Volkswagen of Am.,
Inc., 545 F.3d 304, 315 (5th Cir. 2008) (quotation omitted). “The public interest factors
are: (1) the administrative difficulties flowing from court congestion; (2) the local
interest in having localized interests decided at home; (3) the familiarity of the forum
with the law that will govern the case; and (4) the avoidance of unnecessary problems
of conflict of laws or in the application of foreign law.” Id. (quotation omitted, cleaned

9

up). Sommery Lot 2 argues that these factors weigh in favor of denying the Motion to
Transfer and keeping this case in the Western District of Texas.
The problem for Sommery Lot 2 is that the § 1404(a) factors are irrelevant
when applying the first-to-file rule. “[T]he ‘first-to-file rule’ not only determines which
court may decide the merits of substantially similar cases, but also establishes which
court may decide whether the second suit filed must be dismissed, stayed or
transferred and consolidated.” Sutter Corp. v. P & P Indus., Inc., 125 F.3d 914, 920
(5th Cir. 1997). “Accordingly, the majority of district courts find that only the firstfiled court should engage in a § 1404(a) analysis.” Barnes v. Sandbox Transp., LLC,
No. MO:18-CV-00050-DC, 2018 WL 11471781, at *3 (W.D. Tex. June 16, 2018); see
Yeti Coolers, LLC v. Beavertail Products, LLC, No. 1-15-CV-415 RP, 2015 WL
4759297 (W.D. Tex. Aug. 12, 2015) (“Thus, as our sister court has stated ‘the Fifth
Circuit made clear that it is the first-filed court, not this court, that should make the
§ 1404(a) determination.’”) (quoting Twin City Ins., 2009 WL 1544255, at *6).
Because Sommery Round Rock filed its suit first in New York, the New York
Court is the appropriate body to determine whether transfer is warranted under the
§ 1404(a) factors. Accordingly, the undersigned finds Sommery Lot 2’s arguments
against transferring this action to the New York Court unpersuasive.
C.

Minimum Contacts in New York

Finally, Sommery Lot 2 argues that this Court should stay its ruling on the
Motion to Transfer pending resolution of its jurisdictional challenge in the New York
Action. But the only support Sommery Lot 2 provides for that contention is two cases

10

saying that courts have the authority to stay cases in these circumstances. See W.
Gulf Mar. Ass’n, 751 F.2d at 729 n.1 (“In addition to outright dismissal, it sometimes
may be appropriate to transfer the action or to stay it.”); Yeti Coolers, LLC v. Ontel
Products Corp., No. 1:16-CV-1283-RP, 2017 WL 8182753, at *1 (W.D. Tex. Aug. 14,
2017) (“The rule grants federal district courts the discretion to dismiss, stay, or
transfer a later-filed action in favor of the first-filed action and therefore avoid
duplicative litigation.”). None of those cases stands for the proposition that this Court
ought to grant a stay in these circumstances.
The undersigned concludes that a stay is inappropriate in this case. For the
reasons elaborated above, Fifth Circuit precedent dictates that this case be
transferred to the first-filed forum, New York. Accordingly, the undersigned
recommends that the Motion to Transfer be granted. Because the undersigned
recommends granting the Motion to Transfer, there is no need to consider Sommery
Round Rock’s alternative arguments for dismissal.

In

accordance

IV.

RECOMMENDATION

with

the

foregoing

discussion,

the

undersigned

RECOMMENDS that the District Court GRANT Defendant Sommery Round Rock
TX, LLC’s Motion to Transfer, Dkt. 6. IT IS FURTHER ORDERED that this case
be removed from the Magistrate Judge’s docket and returned to the docket of the
Honorable Robert Pitman.

11

V.

WARNINGS

The parties may file objections to this Report and Recommendation. A party
filing objections must specifically identify those findings or recommendations to
which objections are being made. The District Court need not consider frivolous,
conclusive, or general objections. See Battle v. United States Parole Comm’n, 834 F.2d
419, 421 (5th Cir. 1987). A party’s failure to file written objections to the proposed
findings and recommendations contained in this Report within fourteen days after
the party is served with a copy of the Report shall bar that party from de novo review
by the District Court of the proposed findings and recommendations in the Report
and, except upon grounds of plain error, shall bar the party from appellate review of
unobjected-to proposed factual findings and legal conclusions accepted by the District
Court. See 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, 150-53 (1985);
Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en banc).
SIGNED May 7, 2024.

DUSTIN M. HOWELL
UNITED STATES MAGISTRATE JUDGE

12