CHRISTOPHER C. CONNER, Chief Judge.
Presently before the court is a motion (Doc. 10) to dismiss for improper venue or, in the alternative, to transfer or stay filed by defendants Jeffrey G. Ward and Rebecca L. Ward on July 3, 2014. For the reasons that follow, the court will deny the motion.
Plaintiff Sinclair Cattle Company, Inc. ("SCC") runs a Black Angus cattle farming business and conducts operations in Pennsylvania, Wyoming, Virginia, West Virginia, Montana, and Nebraska. (Doc. 1 ¶¶ 10-11). Its operations include breeding cattle; purchasing and selling cattle; collection, storage, implantation, and sale of cattle embryos; and related duties. (Id. ¶ 12). Defendant Jeffrey Ward ("Ward") was an employee of SCC from its establishment in 1996 until 2013 and served as its president, treasurer, and acting chief executive officer. (Id. ¶¶ 15, 19). Between 1996 and 2013, Ward managed the day-to-day cattle farming operations of SCC, which included authorizing the payment of salaries and company expenses; overseeing the breeding, sale, and purchase of cattle; and managing SCC's Pennsylvania farm. (Id. ¶¶ 18, 20; see also Doc. 12 at 2). Ward's wife, Rebecca Ward ("Mrs. Ward"), also worked at SCC and performed office management duties between 1998 and 2013. (Doc. 1 ¶ 23). J. Duncan Smith ("Smith"), currently the sole shareholder of SCC, retained ultimate
In September 2013, as a result of an investigation by a financial consultant, Smith purportedly discovered misappropriation of SCC's funds and property by the Wards and consequently terminated their employment. (Doc. 1 ¶¶ 100-129). SCC avers that defendants abused their control over the operations of the company for years by, inter alia, misappropriating company funds for personal use, transferring company property without full payment to SCC, obtaining fraudulent reimbursements from SCC, and causing funds due to SCC to be paid to accounts under defendants' control. (Id. ¶¶ 26-27).
In March 2014, counsel for SCC and the Wards conferred regarding a possible financial settlement. (Doc. 14 at 5; Doc. 12 at 4). The Wards submitted formal settlement offers on March 20 and March 25, 2014. (Doc. 14 at 5).
On July 3, 2014, defendants also filed before this court a motion to dismiss or, alternatively, a motion to transfer or stay the action. (Doc. 10). The Wards argue that SCC's complaint should be dismissed for improper venue. (Id.) They contend that, that although SCC filed its complaint in the instant action before defendants filed their related complaint in the District of Wyoming, the court should depart from the "first-filed" rule because SCC acted in bad faith by filing an anticipatory complaint in light of SCC's March 26, 2014 email indicating that it would refrain from taking legal action to a certain extent. (Doc. 12 at 2). Defendants argue in the alternative that the court should stay the action or transfer it to the District of Wyoming pursuant to 28 U.S.C. § 1404(a). (Id. at 2, 10-11). The motion has been fully briefed and is ripe for disposition.
Rule 12(b)(3) of the Federal Rules of Civil Procedure allows a defendant to move to dismiss for improper venue. FED. R. CIV. P. 12(b)(3). When venue is improper, a district court must dismiss the action or, if in the interest of justice, transfer the action to a district in which it could have been brought. 28 U.S.C. § 1406(a). The party moving for dismissal based on improper venue "has the burden of proving the affirmative defense." Myers v. Am. Dental Ass'n, 695 F.2d 716, 724 (3d Cir.1982). When considering a motion to dismiss for improper venue, the
Section 1404(a) of the United States Code governs the transfer of an action to a more convenient forum. 28 U.S.C. § 1404(a). A court has the discretion to transfer a civil action to another federal district court "for the convenience of parties and witnesses, in the interest of justice." Id. In evaluating a motion to transfer, the court must first determine whether the action could have been brought in the proposed transferee forum, and, if so, must balance a series of public and private interest factors weighing in favor of or against transfer. See Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir.1995); High River Ltd. P'ship v. Mylan Labs., Inc., 353 F.Supp.2d 487, 492 (M.D.Pa.2005). The court must "consider all relevant factors" to assess "whether on balance the litigation would more conveniently proceed and the interests of justice be better served by transfer to a different forum." Jumara, 55 F.3d at 879 (citation omitted). The moving party bears the burden of showing that "all relevant things considered, the case would be better off transferred to another district." In re United States, 273 F.3d 380, 388 (3d Cir. 2001) (citation omitted).
The Third Circuit has adopted the "first-filed" rule, which requires that "[i]n all cases of federal concurrent jurisdiction, the court which first has possession of the subject must decide it." EEOC v. Univ. of Pa., 850 F.2d 969, 971 (3d Cir.1988) (alteration in original) (quoting Crosley Corp. v. Hazeltine Corp., 122 F.2d 925, 929 (3d Cir.1941)).
However, the first-filed rule is not inflexible. See id. at 972; Oak Assocs., Ltd. v. Palmer, No. 05-4210, 2006 WL 293385, at *3 (E.D.Pa. Feb. 7, 2006). A court is not required to apply the rule rigidly; rather, it has the discretion to consider the specific circumstances of the case when determining whether to dismiss an action pursuant to the first-filed rule. See Synthes, 978 F.Supp.2d at 455. Indeed, "[t]he letter and spirit of the first-filed rule . . . are grounded on equitable principles." EEOC, 850 F.2d at 977. Certain exceptions, though rare, have been recognized by the Third Circuit as justifying departure from the rule. Zelenkofske Axelrod Consulting, L.L.C. v. Stevenson, No. 99-3508, 1999 WL 592399, at *2
Synthes, 978 F.Supp.2d at 455. In determining whether an exception to the first-filed rule applies, "due consideration to the orderly administration of justice counsels in favor of ordinarily respecting the first-filed rule." Koresko v. Nationwide Life Ins. Co., 403 F.Supp.2d 394, 400 (E.D.Pa. 2005).
As a threshold matter, the court must consider whether the Pennsylvania and Wyoming actions are sufficiently similar to permit the application of the first-filed rule. Courts within the Third Circuit have adopted different approaches to the similarity requirement. Some courts have interpreted the first-filed rule narrowly and apply it only to actions in which the issues and parties are functionally identical. See, e.g., Century Indem. Co. v. Certain Underwriters at Lloyd's, No. 09-94, 2010 WL 92531, at *3 (E.D.Pa. Jan. 11, 2010); CertainTeed Corp. v. Nichiha USA, Inc., No. 09-CV-3932-LS, 2009 WL 3540796, at *3-4 (E.D.Pa. Oct. 29, 2009); Academyone, Inc. v. Collegesource, Inc., No. 08-5707, 2009 WL 792865, at *1-3 (E.D.Pa. Mar. 23, 2009).
Others have adopted a flexible approach and focus instead of the degree to which the subject matter and parties in the two actions overlap. See, e.g., Pittsburgh Logistics Sys., Inc. v. C.R. Eng., Inc., 669 F.Supp.2d 613, 622 (W.D.Pa. 2009); Villari Brandes & Kline, P.C. v. Plainfield Specialty Holdings II, Inc., No. 09-2552, 2009 WL 1845236, at *6 (E.D.Pa. June 26, 2009); Shire U.S., Inc. v. Johnson Matthey, Inc., 543 F.Supp.2d 404, 409 (E.D.Pa.2008). Under this approach, "[t]he applicability of the first-filed rule is not limited to mirror image cases where the parties and the issues perfectly align." Villari Brandes & Kline, P.C., 2009 WL 1845236, at *6. As the court in Synthes explained, many of the former cases rely on nonbinding dictum in the Third Circuit's decision in Grider v. Keystone Health Plan Central, Inc. that the first-filed rule is available only when the two actions are sufficiently duplicative such that "a determination in one action leaves little or nothing to be determined in the other." See Synthes, 978 F.Supp.2d at 456 (quoting Grider v. Keystone Health Plan Cent., Inc., 500 F.3d 322, 333 n. 6 (3d Cir.2007)). The essential inquiry, according to Synthes, is the whether the subject matter of the two actions substantially overlaps. Id. at 456-57; see also Shire U.S., Inc., 543 F.Supp.2d at 409 ("[T]he substantive touchstone of the first-to-file inquiry is subject matter."). If application of the first-filed rule required complete identity of issues and parties, then defendants in the first-filed action may be incentivized to forum shop and commence similar but nonidentical actions in other venues. Villari Brandes & Kline, P.C., 2009 WL 1845236, at *6 (citing Advanta Corp. v. Visa U.S.A., Inc., No. 96-7940, 1997 WL 88906, at *3 (E.D.Pa. Feb. 19, 1997)). The court finds this latter authority persuasive.
In the case sub judice, the parties dispute whether any exceptions to the first-filed rule apply but do not appear to argue that the issues or the identities of the parties in either action precludes application of the rule. Both the Pennsylvania and Wyoming actions concern the
Defendants argue that the first-filed rule does not apply because SCC's commencement of the instant action constitutes bad faith and inequitable conduct, as well as anticipatory filing. (Doc. 12 at 2; Doc. 17 at 1-2).
In determining whether the bad faith exception to the first-filed rule applies, "the court looks to the actions of all relevant parties." See Pittsburgh Logistics Sys., Inc., 669 F.Supp.2d at 621. Parties engaged in settlement negotiations may take actions that constitute bad faith sufficient to prevent application of the first-filed rule. See id. at 623. However, "[a] party by virtue of engaging in settlement discussions is not obligated to provide notice to his adversary that he has decided to sue to allow the adversary to commence suit first." Zelenkofske, 1999 WL 592399, at *3.
Several cases in the Third Circuit have considered whether a party engaged in settlement negotiations acted in bad faith by preemptively filing suit. See Pittsburgh Logistics Sys., Inc., 669 F.Supp.2d at 623 (citing cases). In these cases, one party set a deadline by which the dispute was to be resolved via negotiation before recourse to litigation, and in each case the opposing party filed suit before the expiration of the deadline. See FMC Corp., 379 F.Supp.2d at 735, 744-49 (holding that a party's filing of a suit the day before the expiration of a deadline set out in a cease-and-desist letter by the opposing party constituted bad faith); Drugstore-Direct, Inc. v. Cartier Div. of Richemont N. Am., Inc., 350 F.Supp.2d 620, 623-24 (E.D.Pa.2004) (holding that the first-filed rule did not apply when a party filed suit within the one-week grace period set out in a cease-and-desist letter by the opposing party); One World Botanicals Ltd. v. Gulf Coast Nutritionals, Inc., 987 F.Supp. 317, 327-30 (D.N.J.1997) (holding that although the first-filing party's request for an extension of time to respond to a letter did not itself constitute bad faith, its admission that it filed a complaint within the extended time in anticipation of the opposing party's suit permitted departure from the first-filed rule). As the court in Pittsburgh Logistics explained, "[a] suit is `anticipatory' for the purposes of being an exception to the first-to-file rule if the plaintiff in the first-filed action filed suit on receipt of specific, concrete indications that a suit by the defendant was imminent." 669 F.Supp.2d at 623 (citation omitted).
In the case sub judice, SCC's filing of its complaint on June 13, 2014 does not constitute bad faith or anticipatory filing. SCC did not file suit before the expiration of the
In determining whether a first-filing party acted in bad faith, the court "may consider whether a filing preemptively foreclosed settlement negotiations." Koresko, 403 F.Supp.2d at 402. SCC's commencement of the instant action did not foreclose settlement negotiations, as the parties had not engaged in settlement negotiations for over two months. Furthermore, there is no evidence that the Wards gave SCC "specific, concrete indications that a suit was imminent." See Pittsburgh Logistics Sys., Inc., 669 F.Supp.2d at 623. Although defendants aver that they were prepared to file a complaint in the District of Wyoming in March 2014 (Doc. 12 at 4; Doc. 11 at 1; Doc. 17-3 ¶ 3), there is no indication that they informed SCC that any suit was imminent. Indeed, SCC's counsel declared that defendants never communicated that they were prepared to file suit against SCC and that at
Additionally, courts often look to the status of the second-filed action to determine whether departure from the first-filed rule would better satisfy the rule's equitable goals. When the second-filed action in another jurisdiction has developed further than the first, a court has the discretion to reject the rule and permit the second-filed action to move forward. EEOC, 850 F.2d at 976. The action filed by defendants in the District of Wyoming has been stayed pending the resolution of the first-filed issue by this court. Ward v. Smith, No. 1:14-cv-0133-ABJ (D.Wyo. Sept. 22, 2014), ECF No. 26. The Wyoming action has not developed to the point that it would be equitable to depart from the first-filed rule. Accordingly, the court concludes that the first-filed rule applies to the instant action and will decline to dismiss or transfer this action for improper venue.
A district court may transfer an action to another district for the convenience of the parties and witnesses and in the interest of justice. 28 U.S.C. § 1404(a). As an initial matter, the court must determine whether the action could have been brought in the proposed transferee forum. Jumara, 55 F.3d at 879; High River Ltd. P'ship, 353 F.Supp.2d at 492. Venue is proper in "a judicial district in which any defendant resides" if all defendants reside in the same state, or in "a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated." 28 U.S.C. § 1391(b). SCC argues that the instant action should not be transferred to the District of Wyoming because venue does not lie in Wyoming. (Doc. 14 at 18-20). The Wards contend that venue
The court first considers (1) the plaintiff's choice of forum; (2) the defendants' forum preference; (3) where the claims arose; (4) the convenience of the parties as indicated by their physical and financial condition; (5) the convenience of the witnesses (to the extent that they may be unavailable for trial in one of the fora); and (6) the location of books and records. Id. Defendants advance several arguments regarding these private interest factors. First, the Wards argue that SCC's choice of forum is entitled to no deference because Pennsylvania is not its home forum and because SCC engaged in bad faith during settlement negotiations. (Doc. 12 at 11). SCC is a Maryland corporation (Doc. 1 ¶ 1), although the parties appear to dispute whether its principal place of business is in Maryland or Wyoming (see Doc. 1 ¶ 1; Doc. 12 at 11). As a general matter, "a plaintiff's choice of forum is a paramount consideration in any determination of a transfer request, and that choice should not be lightly disturbed." Advanced Fluid Sys., Inc. v. Huber, No. 1:13-CV-3087, 2014 WL 1808652, at *17 (M.D.Pa. May 7, 2014) (quoting Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3d Cir.1970)). However, "a plaintiff's choice of forum is given less deference where the plaintiff chooses a forum outside of its state of residence." WellPet, LLC v. Midwestern Pet Foods. Inc., No. 1:09-CV-1556, 2009 WL 5111790, at *2 (M.D.Pa. Dec. 16, 2009). A plaintiff's choice of forum is also entitled to "less deference when none of the conduct complained of occurred in plaintiff's selected forum." Lomanno v. Black, 285 F.Supp.2d 637, 644 (E.D.Pa.2003) (citation omitted). Defendants correctly note that Pennsylvania is not SCC's home forum. However, this fact does not require the court to give SCC's choice no deference, merely less than if it were SCC's home forum. As discussed infra, much of the conduct at the root of this action occurred in Pennsylvania, where SCC alleges that it owned and operated a farm. Thus, the court will accord some, albeit limited, deference to SCC's choice of forum.
As to the location of the events giving rise to the claim, the Wards concede that "some of the activity giving rise to this action occurred in Pennsylvania." (Doc. 12 at 11). In their District of Wyoming complaint, the Wards allege that relevant event occurred in Pennsylvania, Wyoming, Virginia, and West Virginia. (Doc. 14-22, Ex. D-1). It is clear that a substantial portion of the events underlying both parties' claims occurred in Pennsylvania. Until 2013, the Wards lived in Warfordsburg, Pennsylvania and worked at SCC's Pennsylvania farm. (Doc. 1 ¶ 25). SCC alleges that defendants' alleged misappropriation of funds and fraudulent activities occurred while they lived and worked in Pennsylvania.
The Wards also argue that many witnesses are located in Wyoming or Montana,
Finally, the Wards argue that many of the relevant records are located in Wyoming. (Doc. 12 at 12). They do not, however, point to any concrete information about the location of specific records. SCC counters that its "corporate and operational records" are closer to Pennsylvania and notes that the custodians for the Wards' banking records are located in Pennsylvania. (Doc. 14 at 8, 20; Doc 14-19, Ex. B-6). Although the Wards aver that SCC recently moved its principal place of business to Wyoming, they have not demonstrated that the location of relevant records counsels in favor of transfer to Wyoming.
The court must then balance the foregoing private interest factors against (1) the enforceability of the judgment; (2) practical considerations regarding trial; (3) relative administrative difficulty in the two fora due to court congestion; (4) the local interest in deciding local controversies at home; (5) the public policies of the two fora; and (6) the court's familiarity with the applicable state law in diversity cases. Jumara, 55 F.3d at 879-80. Some of these public interest factors may "play no role" in the § 1404(a) balancing analysis. Lomanno, 285 F.Supp.2d at 647.
The Wards argue that the presence of SCC's assets in "the West" would allow a Wyoming court to better enforce a judgment. (Doc. 12 at 12). However, the Wards do not clarify which relevant assets are located in or near Wyoming. Conversely,
The Wards also argue that the caseload in the District of Wyoming is significantly lighter than the caseload in the Middle District of Pennsylvania. (Id. ("[T]he Middle District of Pennsylvania is ten times as busy as its sister district in Wyoming." (emphasis omitted))). Although not dispositive to the transfer analysis, the relative congestion of the courts favors transfer to facilitate the efficient resolution of the action.
Another factor to be considered is the local interest in deciding local controversies at home. A substantial portion of the events underlying the claims occurred in Pennsylvania, as the defendants worked at SCC's Pennsylvania farm for over fifteen years. Pennsylvania has an interest in resolving business disputes between parties with longstanding presences in the state. Finally, Pennsylvania law appears to apply to a majority of the claims asserted in both actions. The court's familiarity with Pennsylvania law favors retaining the action in Pennsylvania.
After balancing the relevant public and private interest factors, the court concludes that transfer to the District of Wyoming is not appropriate "for the convenience of parties and witnesses, in the interest of justice." 28 U.S.C. § 1404(a). The bulk of the factors do not favor transfer, and the Wards have not met their burden of showing that "the case would be better off transferred" to the District of Wyoming. See In re United States, 273 F.3d at 388.
For the above-stated reasons, the court will deny defendants' motion to dismiss for improper venue or, in the alternative, to transfer or stay the action.
AND NOW, this 21st day of January, 2015, upon consideration of defendants' motion (Doc. 10) to dismiss for improper venue or, in the alternative, to transfer or stay the above-captioned action, and for the reasons set forth in the accompanying memorandum, it is hereby ORDERED that defendants' motion (Doc. 10) is DENIED.