Summary
staying case only until a ruling by the appellate court
Summary of this case from Alford v. MoulderOpinion
No. 3:02-CV-405-H
June 13, 2002
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant's Motion to Stay, Dismiss, or Transfer, filed April 18, 2002; Plaintiff's Response thereto, filed May 10, 2002; and Defendant's Reply, filed May 23, 2002. Upon review of the pleadings, briefs, and relevant authorities, the Court is of the opinion for the reasons stated below that Defendant's Motion to Dismiss should be DENIED, the Motion to Stay should be GRANTED and the Motion to Transfer DENIED without prejudice.
I. BACKGROUND
This is a breach of contract case. The Plaintiff, Trinity Industries, Inc. ("Trinity"), is in the business of modifying and repairing railcars, including tank cars and railcar equipment. (Compl. at 1). Plaintiff and PLM Transporation Equipment Corp. ("PLM"), an agent of the Defendant, 188 L.L.C. ("188"), entered into a written contract for the repair and modification of approximately 168 tank cars on February 17, 2000. Plaintiff alleges in its Complaint filed in this Court on February 26, 2002, that it inspected 169 cars, and performed repairs and modifications on those that were repairable. (Compl. at 3). Plaintiff explains that 19 of the tank cars were not repairable, and that Plaintiff retained them for salvage. (Compl. at 3). In addition, Plaintiff alleges that it purchased ten replacement tank cars and performed repair work on them. (Compl. at 3). Plaintiff asserts that 188 breached the written contract by failing to pay $3,913,720.25 for Plaintiff's repair work and that it is entitled to this some as well as a constitutional lien. (Compl. at 4).
Defendant, who has not yet answered, filed the instant motion arguing that the present case should be dismissed, stayed or transferred to the United States District Court for the Northern District of Illinois, Eastern Division, because of the existence of a related case ("the Illinois case") pending before the United States Court of Appeals for the Seventh Circuit. 188 filed the Illinois case on December 21, 2000 against Trinity. 188 alleged that Trinity breached the same contract that is the subject of the present case by billing more than agreed, repairing the cars at an untimely schedule, and scrapping cars at an excessive rate. (Mot. at 2). Trinity, without filing an answer, filed a Motion to Dismiss in the Illinois case pursuant to FED. R. Civ. P. 12(b)(6). That Motion was granted on September 7, 2001. 188 appealed the dismissal and the parties engaged in formal settlement conferences from November 6, 2001 through February 14, 2002. Settlement was not successful and oral argument was held before the Seventh Circuit on June 7, 2002. (Reply at 2).
188 argues in the case before this Court that Trinity's claims are counterclaims to those raised in the Illinois suit and should be dismissed or transferred in accordance with the "first filed" rule. In the alternative, 188 asserts that the present case should be stayed pending the outcome of the appeal. Lastly, 188 contends that the present case should be dismissed or transferred because Trinity failed to inform the Court of the existence of the Illinois case when it filed its Complaint. Trinity argues that 188's claims are at best a "setoff" to Trinity's claims for payment and that the "first filed" rule does not apply because there is no case "pending" in the Northern District of Illinois. In addition, Trinity argues that exceptions to the "first filed" rule, such as the filing of a suit during the course of settlement discussions, the filing of a suit in anticipation of the other party's suit, the policies behind the rule do not support its application, and the convenience of the parties weighs in favor of the second filed suit, support retaining the case in this Court. Trinity also asserts that 188 has not met its burden to show that a stay is appropriate in this case. Lastly, Trinity notes that a dismissal is not appropriate even though it failed to notify the Court of the existence of the Illinois case because it attempted to cure the omission with the Court and the District Clerk's office immediately after being notified of the omission and because the Illinois case was arguably not a pending matter when the Complaint was filed in this Court.
III. ANALYSIS
A. Motion to Dismiss
Defendant 188 argues that Plaintiff's case before this Court must be dismissed because this case involves the same dispute as the Illinois case. In support of this position, Defendant cites the Fifth Circuit case of Oliney v. Gardner, for the proposition that "[w]hen a Plaintiff files a second complaint alleging the same cause of action as a prior, pending, related action, the second complaint may be dismissed." 771 F.2d 856, 859 (5th Cir. 1985) (emphasis in original). The Oliney rule, however, is not invoked by our case. First, in Oliney, the related suits had been filed by the same party and involved the same causes of action. Here, the second case was filed by the Defendant in the first action. Second, the second case in Oliney was filed before the first case had been dismissed, which is not the situation here. Fifth Circuit law permits a party to file a would-be counterclaim from an initial case as the main claim in a second action if the first action is dismissed before the party files an answer. See Lawhorn v. Atlantic Refining Co., 299 F.2d 353, 357 (5th Cir. 1962) ("[A Defendant] should not be forced into Court by a would-be Plaintiff and forced to assert, or lose, a claim which he may choose not to litigate at all, or which he may choose to assert at another time and place."). To argue, as Defendant 188 does here, that our case must be dismissed because of the previous existence of a related case in Illinois, ignores the crucial fact that the Illinois case was dismissed and controverts the Lawhorn rule. Therefore, it is inappropriate to dismiss Trinity's claims merely because 188 has an appeal in a related case pending before the Seventh Circuit.
The Court will also not dismiss Plaintiff's suit for failure to inform the Court of the existence of the appeal of the Illinois case. Local Rule 3.1(c) provides that a Plaintiff must file a copy of a civil cover sheet with its complaint. The civil cover sheet asks the Plaintiff to list pending cases and identify the docket number and Judge. Plaintiff asserts that it did not need to identify the Illinois case because the Illinois case was not a pending case at the time the complaint was filed in this Court. In addition, Plaintiff provides that it immediately contacted the Court when it recognized the omission. Given the early stage of proceedings in this Court, the omission did not affect the Court's trial schedule and Defendant does not make any showing that it was harmed by the omission. Thus, the Court will not dismiss Plaintiff's Complaint on this ground.
B. Motion to Stay
In the alternative, Defendant 188 moves for a stay pending the outcome of the Seventh Circuit appeal. Defendant argues that a stay of this case would promote judicial efficiency. See, e.g., Castanho v. Jackson Marine, Inc., 484 F. Supp. 201, 209 (E.D. Tex. 1980) ("[I]n some cases, a stay pending the outcome of litigation in another court between the same parties, involving the same or controlling issues, is an appropriate means of avoiding unnecessary duplication of judicial machinery."). Plaintiff Trinity argues that 188 has not met its burden to show hardship or inequity if a stay were not entered. Trinity is correct that "a suppliant for a stay must make out a clear case of hardship or inequity in being required to go forward, if there is even a fair possibility that the stay for which he prays will work damage to some one else." Landis v. North American Co., 299 U.S. 248, 255 (1936). This burden, however, is to be presented in the context of the Court's power to stay proceedings, which is incidental to its power to control its docket. See id. at 254. Thus, a showing of need counsels the District Court in moderation, but does not constitute a limitation on its power. See id. at 255. It is with these considerations in mind that this Court balances the competing interests.
Defendant 188 argues that a stay pending an opinion of the Seventh Circuit will determine the appropriateness and necessity of the case before this Court. In addition, 188 asserts that Plaintiff will not be prejudiced because an opinion of the Seventh Circuit is imminent given that oral argument was heard on June 7, 2002, and that Trinity has already waited 14 months from the date the Illinois case was filed and five months after the date it was dismissed to assert its counterclaim. Trinity does not argue that it will be prejudiced by a stay, arguing primarily that it is entitled to its choice of forum and that 188 has not met its burden to establish a need for the stay.
The Court is also aware that if the Seventh Circuit remands the Illinois case, it may be appropriate to consolidate the two cases or stay one case pending the outcome of the other. See Nelson v. Grooms, 307 F.2d 76, 78 (5th Cir. 1962) ("When two actions involving the same parties and the same issues are pending before two federal courts it has been held that the court in which the second proceeding is initiated will normally, in the absence of countervailing factors, stay the proceeding pending the outcome of the prior similar suit between the same parties in the other federal court."). It would be inefficient to proceed with this case only to find that the Illinois case was later remanded and that the parties were litigating the same issues in two separate cases. Therefore, this Court will exercise its discretion and stay proceedings in this case only until a ruling of the Seventh Circuit so that this Court may efficiently manage its docket. See Landis, 299 U.S. at 256 (noting that a stay may be appropriate where convenient and not lengthy). The Court notes that this stay is by no means indefinite, and that the parties are to report to this Court within 10 days of a ruling of the Seventh Circuit. See Landis, 299 U.S. at 255 (suggesting that staying a case indefinitely constitutes an abuse of discretion).
C. Motion to Transfer
Given that a stay is appropriate in this case, the Court denies without prejudice Defendant's Motion to Transfer.
III. CONCLUSION
Defendant's Motion to Dismiss is DENIED and Motion to Stay is GRANTED. Defendant's Motion to Transfer is DENIED without prejudice and will be considered by the Court after the stay is lifted. The parties are DIRECTED to file a Joint Report to the Court no later than 10 days after a ruling of the Seventh Circuit setting forth a summary of the decision.