Opinion
No. 53493-9-I
Filed: April 4, 2005 UNPUBLISHED OPINION
Appeal from Superior Court of King County. Docket No. 03-2-36176-3. Judgment or order under review. Date filed: 12/05/2003. Judge signing: Hon. Mary E. Roberts.
Counsel for Appellant(s), Brian D. Buckley, DLA Piper Rudnick Gray Cary US LLP, 701 5th Ave Ste 7000, Seattle, WA 98104-7044.
Stellman Keehnel, DLA Piper Rudnick Gray Cary US LLP, 701 5th Ave Ste 7000, Seattle, WA 98104-7044.
Kit William Roth, DLA Piper Rudnick Gray Cary US LLP, 701 5th Ave Ste 7000, Seattle, WA 98104-7044.
Anthony Todaro, DLA Piper Rudnick Gray Cary US LLP, 701 5th Ave Ste 7000, Seattle, WA 98104-7044.
Counsel for Respondent(s), Larry Steven Gangnes, Lane Powell PC, 1420 5th Ave Ste 4100, Seattle, WA 98101-2338.
John R. Neeleman, Lane Powell PC, 1420 5th Ave Ste 4100, Seattle, WA 98101-2338.
After a dispute about rights under an internet service agreement, Focus Interactive filed a declaratory judgment action against InfoSpace in New York. Not quite two months later, InfoSpace filed suit against Focus Interactive here in Washington. Upon motion by Focus, the trial court dismissed the InfoSpace action under the priority of action rule. Although InfoSpace now argues that the court should have stayed the Washington action instead of dismissing it, InfoSpace did not request that relief below. Because InfoSpace's argument for a stay is not preserved for appeal, and the trial court's application of the priority of action rule is well-supported by the record, we affirm.
InfoSpace, Inc. is a wireless and internet software company with an emphasis on the internet search and directory business. InfoSpace Sales, LLC is a limited liability corporation whose sole member is InfoSpace, Inc. Both companies have their principal place of business in Bellevue, Washington.
Focus Interactive, Inc. is an internet company that owns and operates internet portals and web pages, including excite.com, the subject of this litigation. Focus has its principal place of business in Irvington, New York.
In Fall 2001, InfoSpace, Inc. successfully bid to acquire the excite.com domain name, related trademarks, and other assorted assets related to the excite website. Focus agreed to pay a portion of the purchase price. In the purchase agreement InfoSpace transferred to Focus all of its acquired right, title and interest to the excite assets, subject to certain retained licenses.
InfoSpace Sales and Focus entered into an internet service agreement, the provisions of which were to govern the operation of the excite internet portal. Under the agreement, InfoSpace was to be "the exclusive provider of search services, yellow and white pages listings and certain classified listings on the Excite Portal." The agreement granted Focus, among other things, the right to sell and serve advertisements, promotions, and sponsorships on the website. The service agreement contained no forum selection clause, but it did contain a choice of law provision, designating that the agreement "shall be governed by, and construed in accordance with, the laws of the State of Washington without reference to its conflicts of law rules."
Clerk's Papers at 82.
Clerk's Papers at 89.
At some point, Focus became dissatisfied with its obligations in operating the website. The Chief Executive Officer of Focus, in a letter to InfoSpace, Inc., stated on February 5, 2003, that the excite property was a "major failure" for Focus financially. Focus had invested more money than originally contemplated in connection with the acquisition of excite, including hardware and software upgrades Focus felt were "critical to user retention." Focus considered these upgrades necessary for the success of the excite.com website, but not something Focus was contractually obligated to do.
Clerk's Papers at 20.
Clerk's Papers at 20.
Focus did not receive what it considered an adequate response to the financial concerns stated in the letter, so in a later letter to InfoSpace dated April 3, 2003, Focus outlined several of its "broad rights" under the service agreement. Focus stated that in "the absence of a mutually beneficial relationship," Focus would, in the exercise of these broad rights, begin to make changes to the website "to operate the site in order to maximize our return and in a manner that does not violate InfoSpace's rights."
Clerk's Papers at 198.
Clerk's Papers at 198.
Sometime after this letter, Focus began making modifications to the website that InfoSpace found objectionable. In reaction to the modifications, on Friday, July 25, 2003, counsel for InfoSpace sent Focus a cease-and-desist letter, outlining perceived breaches of the service agreement, demanding that Focus discontinue certain practices, and stating that such breaches entitled InfoSpace to the liquidated damages provided by the service agreement. InfoSpace did not directly threaten litigation, but mentioned that the breaches perceived by InfoSpace violated the covenant of good faith and fair dealing under Washington law. The letter stated that "InfoSpace reserves all of its rights and remedies" with respect to Focus' "breach of the Agreement".
Clerk's Papers at 215.
Apparently in response to this letter, Focus filed an action for declaratory judgment in New York on Tuesday, July 29, 2003, naming InfoSpace Inc. as the defendant. Focus claims that in the meantime, it did cease the activities to which InfoSpace objected. InfoSpace contends the objectionable activities continued.
InfoSpace and InfoSpace Sales filed the present action against Focus in King County Superior Court on September 22, 2003. InfoSpace's action claimed breach of contract, breach of the duty of good faith and fair dealing, unfair business practices, misrepresentation, and fraud.
InfoSpace also sought a declaratory judgment that certain actions threatened by Focus would constitute a breach of contract.
Focus moved "to dismiss, or, in the alternative, to stay" the InfoSpace action based on the "priority of action" rule and the doctrine of comity. InfoSpace responded that the priority of action rule did not apply, both because the Focus lawsuit was filed in anticipation of an InfoSpace suit and also because the lawsuits were not identical. InfoSpace also argued that the suit properly belonged in Washington under a forum non conveniens analysis. After hearing argument, the trial court dismissed the InfoSpace action without prejudice. InfoSpace appeals.
Clerk's Papers at 32.
PRIORITY OF ACTION RULE
Under the priority of action rule, the court which first gains jurisdiction of a cause retains the exclusive authority to deal with the action until the controversy is resolved. City of Yakima v. Int'l Ass'n of Fire Fighters, Local 469, 117 Wn.2d 655, 675, 818 P.2d 1076 (1991). This common law rule prevents interference by one court with the authority of another court of competent jurisdiction, as well as prevents "unseemly, expensive, and dangerous conflicts of jurisdiction and of process." American Mobile Homes of Washington v. Seattle-First Nat'l Bank, 115 Wn.2d 307, 317, 796 P.2d 1276 (1990) (quoting Sherwin v. Arveson, 96 Wn.2d 77, 80, 633 P.2d 1335 (1981)). It applies where the two actions share identity of subject matter, relief and parties.
The priority of action rule is enforced either by the first court enjoining the parties from further action in the second court, or by the second court dismissing or staying the proceedings pending in the second court. American Mobile Homes, 115 Wn.2d at 317. The decision to invoke comity and the priority of action rule is discretionary. See Haberman v. Washington Public Power Supply System, 109 Wn.2d 107, 161, 744 P.2d 1032 (1987), Pacesetter Systems, Inc. v. Medtronic, Inc., 678 F.2d 93, 95 (9th Cir. 1982). The trial court here ordered dismissal, based on the priority of action rule as discussed in American Mobile Homes.
In American Mobile Homes, the two actions were filed in different counties within the State of Washington. InfoSpace argues that the priority of action rule is inapplicable here because the actions were filed in different states; according to InfoSpace, in that situation dismissal of claims is beyond the authority of the trial court. InfoSpace contends that the correct legal standard that the trial court should have applied, instead of American Mobile Homes, is found in Marcus v. Marcus, 3 Wn. App. 370, 475 P.2d 571 (1970). There, the trial court denied a wife's motion to dismiss her husband's action for divorce. Appealing, the wife argued that the motion should have been granted because a divorce proceeding was already pending in Rhode Island. This court affirmed:
Her claim is without merit for the pendency of a prior action in one state is not a ground for abating a subsequent action in this state. Townsend v. Rosenbaum, 187 Wash. 372, 60 P.2d 251 (1936). Gilman v. Gilman, 41 Wn.2d 319, 249 P.2d 361 (1952), does not hold, as appellant suggests, that an action must be abated when the other court is in another jurisdiction, but requires only that a second divorce action between the same parties in a different court in the same jurisdiction must be abated. Further the trial court found the Rhode Island proceeding to be an action seeking separate maintenance rather than divorce. No evidence was offered to contradict this finding. Because different relief was being sought in Rhode Island, the motion to abate was properly denied.
Marcus, 3 Wn. App. at 373 (emphasis added). See also Townsend v. Rosenbaum, 187 Wash. 372, 393, 60 P.2d 251 (1936) ("The fact that jurisdiction has been acquired in a subsequent case in one state during the pendency of another action in another state does not require the abatement of the later action."); Milwaukee Lumber Co. v. Superior Ct. of Washington In and For Spokane Cty., 147 Wash. 615, 616, 266 P. 1054 (1928) ("Realtor's counsel admit (and it is undoubtedly the law, 1 C.J. p. 83, sec. 110), that the pendency of a law action in personam in one jurisdiction does not constitute sufficient ground for abatement of an action, later filed in personam in a court of another jurisdiction"); Macre v. Weyerhaeuser S.S. Co., 24 F. Supp. 282, 282 (W.D. Wash. 1938) ("It is primer law that pending of two actions between the same parties for the same subject matter is not cause for abatement of one action.").
The policy justifying the rule in Marcus is to protect the plaintiff from the statute of limitations. See Power Train, Inc. v. Stuver, 550 P.2d 1293 (Utah 1976), holding that a "pending action in another state may be grounds for a stay of the proceedings but not for a dismissal." Power Train, 550 P.2d at 1294.
The distinction between a stay and a dismissal can be of great significance to plaintiffs. If Stuver should dismiss his action in California or if the action in California should not resolve all the issues raised in the complaint herein, the statute of limitations may bar refiling the action. Any hardship to defendant is outweighed by the advantage to plaintiffs.
Power Train, 550 P.2d at 1294.
If InfoSpace had urged the trial court below to stay the action rather than dismiss it, in order to accommodate a concern about the statute of limitations, the trial court might have chosen to enter a stay. But InfoSpace did not request a stay below. InfoSpace makes the Marcus argument for the first time on appeal, and has not at any time expressed concern about the statute of limitations potentially precluding any of its claims. InfoSpace's objective, until now, has been to litigate this action in Washington without waiting for the New York action to be finished. Arguments not raised in the trial court generally will not be considered on appeal. RAP 2.5(a). The policy underlying RAP 2.5(a) is to promote the efficient use of judicial resources. State v. Scott, 110 Wn.2d 682, 685, 757 P.2d 492 (1988). This goal is frustrated when the trial court is not given an opportunity to correct alleged errors and thereby avoid an appeal and a consequent new hearing or trial. Postema v. Postema Enterprises, Inc., 118 Wn. App. 185, 193, 72 P.3d 1122 (2003). While it is true that the motion by Focus requested either a dismissal or a stay, the only position advocated by InfoSpace was that the motion should be denied, and the Washington action should be allowed to proceed regardless of the New York action. Thus, not only did InfoSpace fail to preserve the alleged error, but also invited it by requesting the trial court to deny the Focus motion to dismiss or stay.
Because InfoSpace did not make an argument for a stay or cite the Marcus line of cases below, we will not consider such an argument here. See Walsh v. Brousseau, 62 Wn. App. 739, 815 P.2d 828 (1991) (refusal to consider on appeal the failure of the trial court to award accounting fees when Walsh failed to specifically request accounting fees, even though agreement awarded such costs and Walsh had filed a supplemental memorandum regarding his accounting fees).
APPLICATION OF THE PRIORITY OF ACTION RULE — IDENTITY OF PENDING ACTIONS
InfoSpace next argues that the Washington action should be allowed to proceed because it is not identical to the New York action. The priority rule is generally applicable when the cases involved are identical as to subject matter, parties, and relief. American Mobile Homes, 115 Wn.2d at 320. InfoSpace argues that the subject matter is not identical because the Washington action has InfoSpace's fraud and consumer protection claims while the New York action does not; the parties are not identical because Focus named only InfoSpace, Inc. and not InfoSpace Sales as a defendant in the New York action; and the relief is not the same because InfoSpace asserts a claim for damages, whereas the action by Focus seeks a declaratory judgment.
These distinctions are minor, especially considering InfoSpace acknowledges that InfoSpace Sales has now been added by stipulation as a party to the New York Action. Also, InfoSpace has since added the fraud and consumer protection claims as counterclaims in the New York action. In any event, the application of the priority rule is not precluded just because there is not complete identity. American Mobile Homes, 115 Wn.2d at 320. The court may still apply the priority rule after considering other factors. These factors include whether the filing was a "preemptive strike" in anticipation of the later filed action, as well as other "countervailing equitable considerations" such as a forum selection clause, the convenience of the witnesses, and the interests of justice. American Mobile Homes, 115 Wn.2d at 320-21. Here, even assuming there is not a complete identity of subject matter, parties, and relief, InfoSpace has not shown that the equitable factors highlighted in American Mobile Homes militate in favor of allowing their suit to proceed in Washington. InfoSpace primarily argues that the New York filing by Focus was a preemptive strike in anticipation of a suit by InfoSpace. But after InfoSpace's "cease-and-desist letter", a declaratory judgment was the logical next step for Focus, especially given InfoSpace's assertion that the alleged breaches by Focus entitled InfoSpace to damages.
Brief of Appellant at 15, n. 2.
Brief of Appellant at 17, n. 4.
Clerk's Papers at 467.
The trial court reasoned that the record is consistent with either InfoSpace or Focus as a "natural plaintiff" in this dispute:
My reading of the cases and what has occurred in this case lead me to conclude that in fact there is identity of subject matter parties and relief such that application of the first filed rule would be appropriate in this situation.
But given the slight differences in the parties, even if I weren't to automatically apply that rule, taking one step further, as the American Mobile Homes case tells me I should do, I don't see any other factors that would lead me to change the decision that I should go with the first filed case.
The preemptive strike doctrine does not, in my opinion, apply in this case where Focus had perfectly good reason to file a declaratory judgment after they had been threatened with a lawsuit. And it is not a situation where the case was filed simply to beat the other side to court and ensure a particular forum when Focus didn't otherwise have a good faith reason to bring a lawsuit to determine by declaratory judgment what the underlying agreement really requires of the parties.
And I base that in part on the fact that even today in oral argument, Infospace's attorney was equivocal as to whether Infospace would have filed a lawsuit had Focus simply ceased its objectionable behavior and not gone ahead and filed its own lawsuit. I don't think it is clear that Infospace would have filed a lawsuit under those circumstances.
And then there is also the fact that the underlying agreement is an ongoing agreement where, to me, it seems as though it fits perfectly within the cases that discuss when a declaratory judgment is appropriate.
Report of Proceedings at 59-60.
The trial court's reasoning is supported by the record and does not represent an abuse of discretion.
InfoSpace next argues that because Washington law applies, it is "proper that the Washington courts be the continuing custodians of that jurisprudence." InfoSpace contends that New York and Washington law differ as to contract interpretation, the duty of good faith and fair dealing, and the Consumer Protection Act. But other than a general assertion that "many of the specific issues raised by InfoSpace's claims may be matters of first impression" given the context of internet services, Focus has not demonstrated that the issues here raise questions of law unique to Washington, such that the New York courts are incapable of interpreting and properly applying Washington law.
Brief of Appellant at 32.
Brief of Appellant at 32.
InfoSpace further argues that the Washington cause of action should be kept alive because the New York action has not proceeded beyond its early stages and the statistics show that in the New York county where the action is pending, over 10,000 cases are pending before the court, 44 percent of which have been pending for over 16 months. But InfoSpace has not provided evidence that the action would fare any better in King County.
Clerk's Papers at 588.
InfoSpace summarily argues that the court must allow the Washington action to proceed because three "critical witnesses", former InfoSpace employees, reside in Washington and allegedly cannot be compelled to appear in New York for trial. InfoSpace made this argument to the New York court in the motion to dismiss on the grounds of forum non conveniens, and mentioned it in passing to the Washington trial court while responding to a forum non conveniens argument made by Focus. But InfoSpace did not bring up any problem with the three witnesses as an equitable factor militating against application of the priority rule, which is the context for how InfoSpace argues the issue on appeal. We find this argument to be inadequately preserved for review, and decline to address it.
After the Washington trial court's ruling, the New York trial court denied InfoSpace's motion to dismiss on forum non conveniens grounds.
Finally, InfoSpace argues that the trial court erred by dismissing the claims that have no overlap with the Focus New York action — the consumer protection, misrepresentation, and fraudulent inducement claims. Given that there need not be a complete identity in the two actions, InfoSpace has not shown how this variation tips the balance so as to require a different result. In any event, InfoSpace has now added these claims to the New York action as counterclaims.
Because the trial court did not abuse its discretion in dismissing the InfoSpace lawsuit under the priority of action rule, we need not address Focus' additional contention that the dismissal was appropriate under a forum non conveniens analysis.
Both Focus and InfoSpace ask for attorney fees on appeal. InfoSpace is not the prevailing party and therefore is not entitled to fees. Focus asks for fees under RCW 4.84.185 and RAP 18.9(a), claiming InfoSpace's appeal is frivolous and "an exercise in blatant forum shopping". An appeal is frivolous if no debatable issue upon which reasonable minds might differ are presented and the issues are so devoid of merit that no reasonable possibility of reversal exists. Harrington v. Pailthorp, 67 Wn. App. 901, 913, 841 P.2d 1258 (1992). We conclude that InfoSpace's appeal is not so devoid of merit as to warrant the award of attorney fees. The requests for fees are denied.
Brief of Respondent at 47.
The judgment is affirmed.
APPELWICK and COX, JJ., Concur.