Opinion
Civil Action No. 3:04-CV-0097-D.
April 20, 2004
MEMORANDUM OPINION AND ORDER
Plaintiff Mipharm, S.p.A. ("Mipharm") brings this declaratory judgment action against defendant Access Pharmaceuticals, Inc. ("Access") in which it moves to compel Access to arbitrate in the London Court of International Arbitration ("LCIA") a (now-amended) counterclaim filed in the International Court of Arbitration of the International Chamber of Commerce ("ICC"). Mipharm also moves for an award of attorney's fees and costs under 28 U.S.C. § 1927. Access moves to dismiss Mipharm's complaint and requests an award of sanctions under § 1927. For the reasons that follow, the court denies Mipharm's motion to compel as moot, grants Access' motion to dismiss on the ground that this declaratory judgment action is moot, and denies both parties' requests for § 1927 sanctions and/or fees. The court dismisses this action without prejudice by judgment filed today.
Mipharm's March 30, 2004 request for expedited ruling on these motions is also denied as moot.
I
Mipharm contracted with Access to manufacture and license certain Access products. After a dispute arose, Mipharm requested arbitration in the ICC, alleging that Access had breached four separate license agreements ("License Agreements") for four Access products. Under the License Agreements, the parties agreed to be bound by ICC rules, and the request for arbitration is subject to ICC jurisdiction.
On January 5, 2004 Access answered the request for arbitration and counterclaimed. It alleged that Mipharm had failed to perform obligations related to an agreement ("Manufacturing Agreement") that was separate from the License Agreements. The Manufacturing Agreement specified that any claim "arising out of or relating to this Agreement that is not resolved in accordance with the provisions of Section 9.1 will be submitted by the parties to arbitration by the [LCIA] under the rules then in effect for the LCIA[.]" P. Mot. Compel Ex. 3 at 15. Section 9.1 of the Manufacturing Agreement requires a meeting and 30-day period to attempt to reach agreement before taking action under § 9.2. The Manufacturing Agreement — the sole basis of Access' counterclaim — does not mention the ICC, and "ICC arbitration is possible only if there is an agreement between the parties providing for it." ICC Publication 810 at 9. See P. Mot. Compel Ex. 4 at 2.
Neither party complied with N.D. Tex. Civ. R. 7.1(i)(1) and 7.2(e) in briefing its motion. Rule 7.1(i)(1) provides that "[a] party who relies on documentary (including an affidavit, declaration, deposition, answer to interrogatory, or admission) or non-documentary evidence to support or oppose a motion must include such evidence in an appendix." Rule 7.2(e) states that "[i]f a party's motion or response is accompanied by an appendix, the party's brief must include citations to each page of the appendix that supports each assertion that the party makes concerning any documentary or non-documentary evidence on which the party relies to support or oppose the motion." Mipharm did not submit an appendix. Access submitted an appendix but it did not number the pages in the manner required. Neither party cited appendix pages in its brief. Although the extent of the exhibits might typically prompt the court to order rebriefing, it is not done so in this case to avoid the delay that would result. Counsel are reminded to comply with these rules in future cases.
On January 9, 2004 Mipharm wrote Access and requested that it withdraw its counterclaim based upon lack of ICC jurisdiction or Mipharm would request fees and costs. Mipharm wrote again on January 13, requesting that Access withdraw the counterclaim and warning that it would request fees and costs if Access did not comply by the close of business on January 14. Access' counsel, Paul M. Robertson, Esquire ("Robertson"), sent Mipharm a letter on January 14 indicating that Access might amend its counterclaim but that Robertson would have to consult with his client. The letter also indicated that the appropriate client contact would be out of the office January 15 and that Robertson would be out on January 16, and he requested an extension to the end of the business day on January 19.
On January 16, over seven calendar and five working days after Mipharm sent Access the first letter via facsimile, Mipharm transmitted its complaint via express service to the clerk of this court. On January 19 Mipharm delivered a courtesy copy of the complaint to Access' counsel. Later that day Access' counsel emailed Mipharm stating that Access would amend its counterclaim. Because January 19 was a federal holiday, Mipharm's declaratory judgment complaint and separate motion to compel arbitration were docketed on January 20.
On January 21 Access' counsel reiterated that Access was amending its counterclaim and requested that Mipharm withdraw this suit and its motion or face sanctions. On January 26 Access reiterated this request and warning. On January 28 Access amended the counterclaim to omit any reference to the Manufacturing Agreement. On February 5, 2004 Access again requested that Mipharm voluntarily dismiss this suit and withdraw its motion to compel. After Mipharm refused, Access filed its motion to dismiss and request for sanctions on February 17.
II
Access contends that because it withdrew the counterclaim filed in the ICC, Mipharm's lawsuit is moot. Mipharm responds that Access' amended counterclaim is a subterfuge to secure ICC jurisdiction and that, without mentioning the Manufacturing Agreement, Access alleges the same claims that it asserted in the counterclaim. Access alleges in its amended counterclaim, inter alia, that Mipharm "breached the covenant of good faith and fair dealing implied in the License Agreement in failing to establish an improved production facility." Am. Ans. ¶ 22. Mipharm contends that Access' claims have no basis in the Licensing Agreements. It posits that Access' claims are predicated on duties that cannot arise from the License Agreements at issue before the ICC, are instead based on the Manufacturing Agreement, and should be asserted in the LCIA.
The parties indicate that the ICC is considering the jurisdictional arguments currently but that no decision has been issued.
Mipharm's complaint in this court is based on Access' filing the counterclaim in the ICC. Mipharm's complaint and motion to compel refer to Access' counterclaim, which contained multiple references to the Manufacturing Agreement. In the amended counterclaim, Access sues under the Licensing Agreements. An action is moot when, inter alia, it is no longer live. See, e.g., Rocky v. King, 900 F.2d 864, 867 (5th Cir. 1990); Gulf Pub. Co. v. Lee, 679 F.2d 44, 47 (5th Cir. 1982) ("Whether we view the problem as one of mootness or of ripeness, a declaratory judgment has virtually no relevance to the present relations between the [parties]. We conclude that no actual, living controversy exists to support the exercise of our jurisdiction."). Mipharm's declaratory judgment complaint and motion to compel arbitration — both of which rest on the filing of the counterclaim and its reliance on the Manufacturing Agreement — involve a controversy that is no longer live and is therefore moot. The court grants Access' motion to dismiss and denies Mipharm's motion to compel.
See, e.g., Compl. ¶ 10 ("In its Counterclaim, Access alleges that Mipharm failed to perform obligations related to a separate agreeent referred to by the parties as `Manufacturing Agreement.'"); ¶ 11 ("The `Manufacturing Agreement' is the only agreement referenced as the basis of Access' contentions and damages in the Counterclaim.") (citation omitted); P. Mot. Compel at 3 ("In its Counterclaim, Access alleges that Mipharm failed to perform obligations related to a `Manufacturing Agreement' referenced as Exhibit A attached to the Counterclaim." (footnote omitted)), 4 ("The Manufacturing Agreement, which is the basis of the Access Counterclaim, does not contain any provisions evidencing an agreement between the parties to be subject to the ICC rules and jurisdiction for actions arising under the Manufacturing Agreement. . . . Despite the clear language in the Manufacturing Agreement calling for arbitration before the LCIA, Access failed to withdraw its Counterclaim.").
Mipharm has not requested leave to amend its complaint to assert another claim. Moreover, federal courts have broad discretion to grant or refuse declaratory judgment. See Torch, Inc. v. LeBlanc, 947 F.2d 193, 194 (5th Cir. 1991). "Since its inception, the Declaratory Judgment Act has been understood to confer on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants." Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995). This section is "an authorization, not a command" Public Affairs Assocs., Inc. v. Rickover, 369 U.S. 111, 112 (1962) (per curiam). It gives federal courts the competence to declare rights, but it does not impose a duty to do so. Id. "Although `the district court's discretion is broad, it is not unfettered.'" St. Paul Ins. Co. v. Trejo, 39 F.3d 585, 590 (5th Cir. 1994) (quoting Travelers Ins. Co. v. La. Farm Bureau Fed'n, Inc., 996 F.2d 774, 778 (5th Cir. 1993)). The court cannot dismiss a declaratory judgment action "on the basis of whim or personal disinclination." Id. (quoting Travelers, 996 F.2d at 778).
The Fifth Circuit has established certain factors to guide a district court's decision whether to dismiss a declaratory judgment action. These factors are: whether (1) there is a pending state action in which all of the matters in controversy may be fully litigated; (2) plaintiff filed suit in anticipation of a lawsuit filed by defendant; (3) plaintiff engaged in forum-shopping in bringing the action; (4) possible inequities exist in allowing plaintiff to maintain the action; (5) federal court is a convenient forum for parties and witnesses; (6) retaining the lawsuit in federal court would further judicial economy; and (7) the federal court must construe a state judicial decree involving the same parties and entered by the court before whom the parallel state suit between the parties is pending. St. Paul Ins., 39 F.3d at 590-91 (quoting Travelers, 996 F.2d at 778). Having considered the factors, the court would decline to exercise its jurisdiction in a suit that no longer presents a live controversy.
III
Mipharm requests attorney's fees and costs under 28 U.S.C. § 1927 based on Access' filing of the counterclaim in the ICC and its subsequent refusals to withdraw the counterclaim. Access requests sanctions under § 1927 on the ground that Mipharm multiplied the proceedings before this court by filing and pursuing a frivolous and mooted complaint.
Section 1927 provides that "[a]ny attorney . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." Assuming arguendo that the court can impose fees and costs under § 1927, the court declines to do so as a matter of discretion. Punishment of counsel under § 1927 is to be sparingly applied. See FDIC v. Calhoun, 34 F.3d 1291, 1297 (5th Cir. 1994). The threshold for awarding costs under the statute is higher than that set by Fed.R.Civ.P. 11, and there must be a showing of improper motive on the part of an attorney, independent of a showing that the claims pursued were baseless. Id. at 1300. Section 1927 is designed only for those cases where there is clear evidence that an attorney has conducted himself in a way that both unreasonably and vexatiously multiplies proceedings. Id. at 1297. This court has previously adopted in the trial court context the Fifth Circuit appellate standard that examines the recklessness, bad faith, or improper motive that prompts an attorney to multiply proceedings unreasonably and vexatiously. See Tutton v. Garland Indep. Sch. Dist., 733 F. Supp. 1113, 1120 (N.D. Tex. 1990) (Fitzwater, J.) (Title VII case). The court holds that the conduct of Mipharm's and Access' counsel in this case does not rise to the level necessary to warrant the imposition of § 1927 sanctions. Accordingly, the court denies both parties' requests for fees and costs
Access argues that § 1927 does not address pleadings filed in arbitration proceedings and that it did not receive proper notice under the statute. The court need not consider these contentions.
* * *
Mipharm's motion to compel is denied. Access' motion to dismiss is granted, and this action is dismissed without prejudice as moot. Both parties' motions for § 1927 sanctions are denied. This action is dismissed without prejudice by judgment filed today.SO ORDERED.