Summary
finding that brevity of complaint and "numerous technical deficiencies and factual omissions" support inference of anticipatory filing
Summary of this case from Dish Network, L.L.C. v. American Broad. Cos.Opinion
06 Civ. 11408(DLC).
November 29, 2006
MEMORANDUM OPINION ORDER
The above-captioned action arises out of a dispute over the rights to a computer program developed, at least in part, by plaintiffs Shreenath Laxman and Stefan Michael Belinfanti, who are former employees of defendant Edward Shapiro, P.C. Although the dispute stretches back at least a year, it did not come to a head until May 22, 2006, when defendants sent plaintiffs a cease-and-desist letter, claiming that plaintiffs were engaged in copyright infringement, unfair competition, and the theft of trade secrets. On May 30, plaintiffs responded by letter, requesting more information about the allegations, and suggesting that defendants' statements to plaintiffs' clients might be actionable as slander, defamation, libel, or tortious interference with business and contractual relations.
There was apparently no further correspondence between the parties until October 25, when defendants wrote to plaintiffs to advise them that they would be seeking a temporary restraining order and preliminary injunction against each of them. Defendants stated that the action would be filed on October 27 in the United States District Court for the Eastern District of New York, and that it would be based on:
your violations of the Computer Fraud and Abuse Act ( 18 U.S.C. § 1030 et seq.), copyright infringement under the Copyright Act ( 17 U.S.C. §§ 101 et seq.), misappropriation of trade secrets, and unfair competition under the Lanham Act ( 15 U.S.C. § 1051 et seq.).
On the following day, October 26, plaintiffs filed the complaint in this action, seeking a declaratory judgment that they have not infringed defendants' intellectual property rights, engaged in computer fraud, or misappropriated trade secrets. They also bring claims for breach of contract and tortious interference with business and contractual relations.
On October 30, defendants filed their complaint in the E.D.N.Y. and made an application for a temporary restraining order and a preliminary injunction. See Shapiro v. Laxman, No. 06 Civ. 5865 (ADS). On November 1 and November 3, the parties appeared before the Honorable Arthur D. Spatt of the E.D.N.Y. Judge Spatt entered a temporary restraining order in favor of defendants. He also stated that he believed the E.D.N.Y. was the proper forum for the dispute, notwithstanding the fact that plaintiffs' complaint in this action was filed first, since that filing was triggered by defendants' October 25 letter. Judge Spatt, however, has deferred to this Court to determine whether the "first-filed rule" applied to the actions. Defendants now bring the instant motion to dismiss or transfer this action on the ground that the E.D.N.Y. is the proper forum.
To avoid confusion, "plaintiffs" and "defendants" will be used throughout this Opinion to refer to the parties as they are designated in this action. In other words, the term "plaintiffs" will always refer to Shreenath Laxman, et al., notwithstanding the fact that they are defendants in the E.D.N.Y. action. Likewise, "defendants" will always refer to Edward Shapiro, P.C.,et al.
Discussion
The first-filed rule holds that, "[w]here there are two competing lawsuits, the first suit should have priority, absent the showing of a balance of convenience or special circumstances giving priority to the second." D.H. Blair Co., Inc. v. Gottdiener, 462 F.3d 95, 106 (2d Cir. 2006) (citation omitted). "The decision whether or not to stay or dismiss a proceeding rests within a district judge's discretion." Adam v. Jacobs, 950 F.2d 89, 92 (2d Cir. 1991). The Second Circuit has indicated, however, that such special circumstances may arise where a "declaratory judgment action has been triggered by a notice letter." Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215, 219 (2d Cir. 1978), overr'd on other grounds, Pirone v. MacMillan, Inc., 894 F.2d 579 (2d Cir. 1990). Indeed, many courts in this district have found that "anticipatory filing" permits departure from the first-filed rule. See, e.g., Employers Insurance of Wausau v. News Corp., 439 F. Supp. 2d 328, 334 (S.D.N.Y. 2006); CGI Solutions, LLC v. Sailtime Licensing Group, LLC, No. 05 Civ. 4120 (DAB), 2005 WL 3097533, ad *3 (S.D.N.Y. Nov. 17, 2005); Schnabel v. Ramsey Quantitative Systems, 322 F. Supp. 2d 505, 511-12 (S.D.N.Y. 2004).
Here, there is overwhelming evidence that plaintiffs were motivated to file their complaint with this Court solely by their desire to preempt the E.D.N.Y. action. Their filing occurred one day after they received defendants' intent-to-sue letter; the complaint is only seven pages long, exclusive of attachments, and — except for the claim of tortious interference — contains virtually nothing of substance outside of the allegations in defendants' letter; and there are numerous technical deficiencies and factual omissions in the complaint, indicating that it was prepared in haste.
Plaintiffs' arguments in favor of this forum are unavailing. First, their claim that their complaint "was not brought as an anticipatory filing," but rather, in order to "seek resolution to a situation in which repeated frivolous cries of copyright infringement were damaging [p]laintiffs' business" is simply not credible. It is undisputed that the E.D.N.Y. action will resolve those issues. Second, plaintiffs cite no legal authority for the proposition that this action should not be stayed or transferred because it involves an "independent" cause of action for tortious interference with business and contractual relations. Moreover, while it is not clear what plaintiffs mean by "independent," they have not claimed, much less shown, that this cause of action could not be brought as a counter-claim in the E.D.N.Y. proceeding.
Conclusion
For the foregoing reasons, this action shall be stayed pending resolution of the related action in the E.D.N.Y.
SO ORDERED: