Opinion
02 Civ. 2229 (GBD)
July 31, 2002
MEMORANDUM, OPINION AND ORDER
Defendant Quiksilver, Inc. ("Quiksilver") moves to transfer venue, or, in the alternative, to stay or dismiss the proceedings in this Court pending the outcome of another action between the same parties brought by Quiksilver in the U.S. District Court for the Central District of California on February 13, 2002. Plaintiff GMT Corporation ("GMT") opposes Quiksilver's motion to transfer, stay or dismiss.
On September 28, 1992, GMT and Quiksilver entered into a License Agreement ("Agreement"), which granted GMT a license to manufacture and sell watches bearing Quiksilver's trademarks. The Agreement's initial term was for 36 months, but was subsequently extended by the parties to July 2000. The Agreement also contained a five-year extension option, which GMT claims that it exercised in 1998, thereby extending the Agreement until July 2005. In December 2001, in a meeting in New York, Quiksilver indicated to GMT that it did not intend to continue its relationship with GMT after the current renewal period expired in July 2005. GMT's position was that it had a right to renew the License Agreement beyond the current renewal term. After Quiksilver sent a letter to GMT summarizing the issues discussed at the meeting, GMT filed an action on February 13, 2002 in the United States District Court for the Central District of California entitled Ouiksilver v. GMT Corporation Case No. SA02-148 (DOC) (C.D.Cal.), seeking a declaratory judgment that the License Agreement would expire on July 31, 2005 and that GMT had no right to renew or extend the Agreement beyond that date.
GMT immediately moved to dismiss the California action for lack of subject matter jurisdiction. GMT also subsequently filed a complaint on March 20, 2002 in the Southern District of New York alleging breach of the License Agreement. After Quiksilver was notified of a new complaint in New York, on March 25, 2002 Quiksilver filed an amended complaint in the California action containing a single cause of action for GMT's alleged breaches of the License Agreement. The amended complaint makes no mention of the only claim in the original complaint, the claim for declaratory judgment. On March 28, 2002 GMT filed an amended complaint in the New York action, additionally alleging a claim for wrongful termination of the License Agreement. Thereafter, on April 9, 2002 Quiksilver filed the instant motion to transfer, stay or dismiss the New York action. Subsequently, on April 12, 2002 the parties stipulated in the California action that GMT's time to answer or move with respect to the Amended Complaint would be extended until after the instant motion was decided.
It is well settled in this circuit 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." See First City Nat'l Bank Trust Co. v. Simmons, 878 F.2d 76, 80 (2d Cir. 1989). The "first to file" rule generally applies where the two actions involve the same parties and embrace the same issues, but one was filed first. Donaldson. Lufkin. Jenrette, Inc. v. Los Angeles County, 542 F. Supp. 1317, 1320 (S.D.N.Y. 1982). In this case, although the California action was filed first, the amended complaint in that case was filed after the New York action was instituted by GMT. Unless Quiksilver's amended complaint relates back to its original first filed complaint in California, GMT argues that Quicksilver should not benefit from the first to file rule and therefore the New York action should be considered "first" filed. GMT argues that the amended complaint cannot relate back because (1) in Quiksilver's original complaint for declaratory judgment, the California court lacked subject matter jurisdiction, and (2) Quiksilver thereafter abandoned the original declaratory judgment claim in the amended complaint.
As indicated in the record provided, the U.S. District Court for the Central District of California ("California Court") denied GMT's motion to dismiss for lack of subject matter jurisdiction as moot after the amended complaint was filed. The California Court would not have denied the motion, but would have dismissed the case entirely if it had determined that it lacked subject matter jurisdiction. Where leave of court was required to amend a complaint under Rule 15(a), this Court assumes that the California Court examined the existence of subject matter jurisdiction as of the time of the filing of the original complaint. That court was asked to exercise discretion to grant or deny leave to amend which necessarily implied it had authority to do so, authority which would be lacking absent subject matter jurisdiction. An amendment presupposes jurisdiction of the case. See McMichael v. United States, et. al., 63 F. Supp. 598, 600 (N.D. Ala. 1945) citing Hodge v. Williams, 63 U.S. 87 (1859). Thus, GMT's argument that the amended complaint cannot relate back to the original filed complaint because the California Court did not have subject matter jurisdiction is without merit.
An amendment of a pleading relates back to the date of the original pleading when the claim asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth in the original pleading. Fed.R.Civ.P. 15(c)(3). The relation back provision of the Fed.R. of Civ. Pro. 15(c) is premised on the concept that once litigation is properly instituted, defenses such as the statute of limitations should not preclude a party from "the later assertion by amendment of defenses or claims that arise out of the same conduct, transaction, or occurrence as set forth in the original pleading." 6A Wright Miller, Federal Practice Procedure, § 1496, at 64 (2d ed. 1990). Quiksilver's original complaint against GMT sought a declaration from the California Court that GMT had no right to renew the Agreement beyond 2005. This complaint was instituted as a result of a meeting between GMT and Quiksilver in which GMT asserted a right to further renew the Agreement. Quiksilver's amended complaint raised issues relating to the parties' performance and obligations under the Agreement, and claimed that Quicksilver had the right to terminate the Agreement based on GMT's breaches.
This circuit applies the first-filed rule in favor of a plaintiff who amends his complaint to include issues that his adversary has raised in a second-filed suit in another district. Plus Ltd. v. Ja-Ru, Inc., 41 F. Supp. 983 (E.D.N.Y. 1991) citing Mattel, Inc. v. Lous Marx Co., 353 F.2d 421, 424 (2d Cir. 1965), cert. dismissed, 384 U.S. 948, 86 S.Ct. 1475, 16 L.Ed.2d 546 (1966). Here, the same parties are involved in a disagreement about the same Agreement in both the original and amended complaints. GMT is not prejudiced by the filing of the amended complaint because they were already on notice of the action. Although the claim has changed from seeking declaratory relief on the Agreement to claiming an Agreement breach, the claims arise out of the same conduct, transaction, and occurrence as set forth in the original pleading. The first-filed rule can be triggered even when the competing claims do not present the exact same issues. See, Manufacturer's Hanover Trust Co. v. Palmer Corp., 798 F. Supp. 161 (S.D.N.Y. 1992). GMT's argument that the amended complaint should not relate back to the original complaint is therefore unpersuasive. The court finds that the California action was the first action to be filed, and given the amended complaint, it appropriately addresses the disputes GMT raised in its New York action.
The court must still determine whether the balance of convenience or special circumstances take precedence over the first-filed California action, since a court has discretion and does not need to adhere to strict filing dates. 800-Flowers, Inc. v. Intercontinental Florist, Inc., 860 F. Supp. 128, 133 (S.D.N.Y. 1994). However, the party asserting exceptions to the first-filed rule bears the burden to show that equitable considerations recommend the later action, Hanson PLC v. Metro-Goldwyn-Mayer Inc., 932 F. Supp. 104, 106 (S.D.N.Y. 1996), and must overcome the "strong presumption in favor of the forum of the first-filed suit." 800 Flowers, 860 F. Supp. at 131. When balancing the factors of convenience, important considerations include the same factors that apply to a motion to transfer venue pursuant to 28 U.S.C. § 1404(a). GT Plus, 41 F. Supp.2d at 424. Relevant factors include: (1) the convenience of witnesses, including whether non-party witnesses are amenable to process; (2) the location of relevant documents and the relative ease of access to sources of proof, (3) the convenience of the parties; (4) the locus of operative facts; (5) the availability of process to compel attendance of unwilling witnesses; (6) the relative means of the parties; (7) a forum's familiarity with governing law; (8) the weight accorded to a plaintiff's choice of forum; and (9) trial efficiency and the interests of justice, based on the totality of the circumstances. Id.
Applying each of the relevant factors to this case, it is clear that the balance of convenience favors California. Most of the key witnesses in the case are located in California. The documents central to the issues at hand are also located there, as admitted by GMT. This dispute involves a California corporation and its licensee over a California drafted contract. The locus of the operative facts is California. By contrast, GMT cannot show that any of the operative facts occurred in New York or that any parties or major witnesses are located here.
In addition to the balance of convenience factors discussed, courts will deviate from the first to file rule when there are "special circumstances," such as forum shopping, improperly anticipating the other side's lawsuit, or using settlement negotiations as a ruse to be the first-filed. See GT Plus, 41 F. Supp.2d at 425. No evidence of such behavior by Quiksilver is demonstrated here.
For the reasons stated above, Quiksilver's motion to transfer this action to the Central District of California is hereby GRANTED.