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providing the district court has discretion to transfer the action involving the same parties and issues to the second action in a different district
Summary of this case from Arctic Cat Inc. v. Speed RMG Partners, LLCOpinion
Civil File No. 02-4841 (MJD/JGL)
September 2, 2003
Thomas S. Fraser, Jeffrey W. Post, Fredrikson Byron, P.A. for and on behalf of Plaintiff
Deborah A. Ellingboe, Faegre Benson LLP; Richard S. Fry, Shuttleworth Ingersoll, P.L.C. for and on behalf of Defendant
MEMORANDUM AND ORDER
I. INTRODUCTION
This matter is before the Court on Defendant's Motion to Dismiss or for Transfer to the United States District Court for the Northern District of Iowa pursuant to the first filed rule. In the alternative, Defendant moves for Transfer to the Northern District of Iowa pursuant to 28 U.S.C. § 1404(a) or for a Stay of this action pending resolution of a parallel action in the Northern District of Iowa. Plaintiff responds that only this Court can establish jurisdiction over both the parties and the subject matter, and therefore Defendant's Motion is improper. Plaintiff also Moves the Court for an Order enjoining Defendant from proceeding with the action it filed in the Northern District of Iowa.
II. BACKGROUND
A. The Parties
Plaintiff Slidell, Inc. ("Slidell"), is a family-owned Minnesota corporation with its principal place of business in Owatonna, Minnesota. Slidell manufactures custom-built, automated, packaging equipment. Defendant Archer Daniels Midland Company ("ADM") is a Delaware corporation with its principal place of business in Decatur, Illinois. ADM runs operating facilities in Clinton, Iowa ("Clinton facility"), and Cedar Rapids, Iowa ("Cedar Rapids facility"), which produces edible starch commodities that are sold to customers in both bulk and in bags.
B. Slidell's Action in this Court
Slidell's action in this Court involves an agreement for goods and services related to the Clinton facility (the "Clinton Agreement"), entered into by the parties on January 19, 1999. Under the contract, ADM agreed to purchase packaging equipment, including a weigh scale, support frame, hopper, an automated bag filling system, and an automated bag palletizing system with related bag handling equipment (the "Clinton Equipment") for the Clinton facility. ADM agreed to purchase the Equipment on a credit basis, with payment pursuant to the terms of the Clinton Agreement as those payments became due. Slidell alleges that the under the Clinton Agreement, the total price of the Clinton Equipment was $845,700.00. ADM also agreed to purchase parts and support services for the Clinton Equipment on a time and material basis pursuant to a rate sheet contained in the Clinton Agreement.
On March 19, 1999, the parties agreed to a change order to the Clinton Agreement to upgrade the Clinton Equipment's electrical classification. The change order included a net increase of $113,000.00 in the Clinton Agreement price. ADM made the first three contract payments, and was required to make a fourth payment of $191,750.00. Slidell alleges that ADM made a partial payment of $143,812.00 on September 15, 1999, but failed to pay the balance of $47,938.00, which remains unpaid. Slidell alleges that the required fifth payment, of $48,177.61, was billed in October 1999 and paid by ADM in December 1999. Slidell also alleges that ADM has failed to pay $50,561.41 for support services, $2,803.00 for parts, plus interest and service charges that are accruing. In total, Slidell alleges that ADM currently owes $130,411.25. Slidell thus asserts claims for: 1) breach of contract; 2) promissory estoppel; 3) quantum meruit; and 4) statement of account due.
C. ADM's Action in the Northern District of Iowa
ADM's action in the Northern District of Iowa involves the Clinton Agreement and an agreement for goods and services related to the Cedar Rapids facility (the "Cedar Rapids Agreement"), entered into by the parties in the fall of 1998. The Cedar Rapids Agreement is similar in character to the Clinton Agreement, in that ADM agreed to purchase equipment (the "Cedar Rapids Equipment"), parts and support services for the Cedar Rapids Facility. According to ADM, the final price for the Cedar Rapids Agreement was $1.2 million. It appears that ADM made all payments owing under the Cedar Rapids Agreement. ADM alleges that a portion of the Cedar Rapids Equipment has failed to perform as Slidell had represented and warranted. ADM further alleges that the parties have worked extensively to make adjustments to the malfunctioning equipment, but none of the adjustments have been successful in getting the equipment to perform according to Slidell's representations and warranties. ADM thus asserts claims for: 1) breach of express warranty; 2) breach of implied warranty of fitness for a particular purpose; 3) breach of implied warranty of merchantability; and 4) breach of contract. ADM seeks damages for the cost of the nonperforming equipment, installation and service work, additional parts and labor, lost production and wasted product. ADM estimates its damages at $4,256,660.00.
D. The Timing of the Two Actions
1. ADM's Perspective
ADM filed its action in the Northern District of Iowa on December 6, 2002. ADM asserts that before filing the action, ADM's Peter Davies ("Davies") had a telephone conversation with Bob Braaten ("Braaten") of Slidell. This conversation took place following Slidell's request that ADM pay certain invoices relating to the Clinton Equipment. ADM asserts that Davies told Braaten that ADM had not paid the invoices because equipment was not performing and ADM was considering legal action related to the Slidell equipment at the Clinton and Cedar Rapids facilities. ADM further asserts that Braaten made no mention that Slidell was considering legal action against ADM.
ADM asserts that Davies attempted to contact Braaten on December 9, 2002, but Braaten was travelling and not available during that week. On December 16, 2002 Davies again talked with Braaten and informed him that a lawsuit had been filed and that Braaten would be receiving the Complaint and acceptance of service forms from ADM
Slidell filed this action on December 18, 2002, and achieved service on ADM on December 19, 2002. ADM asserts that on December 18, 2002, Davies had a telephone conversation with Slidell's President Jim McGregor ("McGregor"), and that McGregor did not tell Davies that Slidell had sued or was planning to sue ADM. Slidell received by mail ADM's Summons and Complaint, along with an acceptance of service form, on December 28, 2002. Slidell declined to accept service, and was thereafter personally served on January 9, 2003.
2. Slidell's Perspective
Slidell characterizes the timing somewhat differently. Slidell initially looks back to July 11, 2002, when it asserts that it sent ADM a letter seeking the outstanding balance on the Clinton Agreement. Slidell asserts that it sent a second letter dated October 9, 2002. Slidell also asserts that it did not deem litigation an eventuality, because ADM managers Kevin Duffy ("Duffy") and Doug Roberts ("Roberts") allegedly admitted that ADM should pay the invoices.
Slidell asserts that the ADM was silent until November of 2002, when Davies informed Braaten that he was "turning it over to the legal department." However, Slidell did not construe this as a threat of litigation, but rather interpreted Davies' statement as implying that the decision to pay the invoices would be reviewed by ADM's legal department. Slidell asserts that it never contemplated filing a lawsuit, because ADM represented that Slidell would be paid the outstanding balance on the Clinton invoices, and ADM continued to pay the Cedar Rapids invoices.
Slidell makes no mention of the alleged December 16th phone conversation between Davies and Braaten, and instead asserts that during the December 18th phone conversation between Davies and McGregor, that McGregor was under the impression that ADM had not filed a lawsuit. Slidell asserts that during the December 18th conversation, Davies informed McGregor that ADM had purchased other packaging equipment and demanded free service until the new equipment is installed in September 2003. McGregor refused to accede to Davies' demand, because of ADM's failure to pay. Slidell asserts that Davies waited until the end of the conversation to inform McGregor that ADM had already filed suit in Iowa. As noted above, Slidell filed this action on December 18, 2002 and achieved service on ADM on December 19, 2002.
E. The Motions Before this Court
ADM filed the instant motion to dismiss, transfer or stay this action on January 20, 2003. The following day, ADM filed a motion in the Northern
District of Iowa, seeking an injunction to prevent Slidell from pursuing this action. Slidell characterizes the motion for injunctive relief in the Northern District of Iowa as duplicative of this motion. On March 11, 2003, the Honorable Linda R. Reade, U.S. District Court Judge for the Northern District of Iowa, issued an Order denying ADM's application for a preliminary injunction. See Archer Daniels Midland Co. v. Slidell, Inc., No. C 02-174, slip op. at 7 (N.D. Iowa 2003). Judge Reade determined that ADM's application for preliminary injunction raised the same issues as the motion in this Court, and decided to allow this Court to rule first so as to conserve judicial resources and avoid inconsistent rulings. See id. at 6.
ADM alleges that venue is appropriate in the Northern District of Iowa pursuant to 28 U.S.C. § 1391(a) (2), because that is the judicial district in which a substantial part of the events giving rise to its claims occurred. ADM asserts that a substantial portion of events occurred in the Cedar Rapids Facility, and that a substantial portion of the malfunctioning equipment is in Cedar Rapids.
Slidell, on the other hand, alleges that venue is appropriate in the District of Minnesota, because this is the judicial district in which a substantial part of the events giving rise to it's claim occurred. Slidell asserts that the equipment was manufactured in Minnesota and ADM has failed to pay in Minnesota.
F. Choice of Law
Both parties submit that the agreements provide that Minnesota law governs.
III. DISCUSSION
A. ADM's Motion to Dismiss or for Transfer Slidell's Action in this Court, Pursuant to the First-filed Rule
ADM asserts that this Court should dismiss Slidell's action or transfer it to the Northern District of Iowa, pursuant to the first-filed rule. "In cases of concurrent jurisdiction, the first court in which jurisdiction attaches has priority to consider the case as a matter of federal comity." Keymer v. Management Recruiters, Int'l Inc., 169 F.3d 501, 503 n. 2 (8th Cir. 1999) (citing Northwest Airlines, Inc. v. American Airlines, Inc., 989 F.2d 1002, 1004-05 (8th Cir. 1993)). "The first-filed rule gives priority, when parallel litigation has been instituted in separate courts, to the party who first establishes jurisdiction in order to conserve judicial resources and avoid conflicting rulings." Id.
Duplicative litigation in the federal courts should be avoided in order to prevent the unnecessary expenditure of scarce judicial resources. See Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976); Missouri v. Prudential Health Care Plan, Inc., 259 F.3d 949, 953-54 (8th Cir. 2001). Pursuant to the first-filed rule, a district court has the discretion to dismiss the later action, see Anheuser-Busch, Inc. v. Supreme Int'l Corp., 167 F.3d 417, 419 (8th Cir. 1999), or transfer it if an action involving the same parties and issues was earlier-filed in a different district, see Orthmann v. Apple River Campground, Inc., 765 F.2d 119, 121 (8th Cir. 1985); Monsanto Technology LLC v. Syngenta Crop Protection, Inc., 212 F. Supp.2d 1101, 1102 (E.D. Mo. 2002).
Initially, it is important to note that the parties are identical in both actions, and it appears that both parties agree that the issues in both suits are sufficiently similar. See, e.g., Terra Int'l Inc. v. Mississippi Chem. Corp., 896 F. Supp. 1468, 1476 (N.D. Iowa 1995) (stating that court should focus on whether there is a danger of inconsistent results and a duplication of judicial proceedings). It is undisputed that ADM's filing occurred prior to Slidell's filing, and ADM contends that its action is entitled to priority. Nonetheless, Slidell asserts that it is not the filing, but rather service that triggers application of the first-filed rule. The Eighth Circuit has not directly addressed whether it is service or filing that is the key event.
ADM points to decisions from the Sixth Circuit, the Tenth Circuit and the Northern District of Iowa, in support of its contention that filing establishes priority. See Hospah Coal Co. v. Chaco Energy Co., 673 F.2d 1161, 1163 (10th Cir. 1982) (stating that rule that jurisdiction relates back to the filing of the complaint gives effect to Fed.R.Civ.P. 3); Barber-Greene Co. v. Blaw-Knox Co., 239 F.2d 774, 778 (6th Cir. 1957) (stating that because Fed.R.Civ.P. 3 provides that filing, not service, commences an action, the first-filed rule hinges on filing, not service); Med-Tec Iowa, Inc. v. Nomos Corp., 76 F. Supp.2d 962, 968 n. 3 (N.D. Iowa 1999) (stating that the first court in which jurisdiction attaches is the first court in which a civil action is properly commenced).
Slidell, on the other hand, directs this Court to cases from this district to support its contention that service is the key event.See Northwest Airlines, Inc. v. Astraea Aviation Servs., Inc., 930 F. Supp. 1317, 1327 n. 9 (D. Minn. 1996) (stating that the party who serves first is afforded priority under the first filed rule); Red Wing Shoe Co. v. B-Jays USA, Inc., 2002 WL 1398538, at *2 (D. Minn. 2002) ("jurisdiction in Minnesota attached when B-JAYS was served"); see also FirsTier Bank v. G-2 Farms, 1996 WL 539217, at *5 (D. Neb. 1996). Slidell contends that the essential test for determining which action proceeds under the first-filed rule is which court first obtains jurisdiction over both the parties and the subject matter of the action. See Northwest Airlines, 989 F.2d at 1004. Slidell asserts that no court has jurisdiction over a party who has not been served with process. See Sieg v. Karnes, 693 F.2d 803, 807 (8th Cir. 1982). Slidell thus argues that jurisdiction over both the parties and the subject mater of the action first attached in this Court, because Slidell served ADM first.
The Court agrees with ADM that filing of the complaint is the key event that commences a civil action. Such an interpretation best effectuates the plain language of the Federal Rules of Civil Procedure. See Fed.R.Civ.P. 3 (stating that a civil action is commenced by filing a complaint with the court); Hospah, 673 F.2d at 1163; Barber-Greene, 239 F.2d at 778; Med-Tec Iowa, 76 F. Supp.2d at 968 n. 3. As noted above, it is uncontroverted that ADM was the first to file its complaint. As such, ADM's action is entitled to primacy and this action must be transferred to the Northern District of Iowa.
The result in this matter is further bolstered by the fact that it appears from the record that Slidell rushed to serve ADM after receiving notice that ADM had filed suit. See 167 F.3d at 419 (stating that it appeared that plaintiff raced to the courthouse to usurp defendant's forum choice). In addition, the fact that the equipment at issue is located in Iowa, individuals with significant knowledge of the equipment and its problems are in Iowa, the fact that Slidell has provided service on the equipment in Iowa, and documentation regarding production problems and damages are located primarily in Iowa, make the Northern District of Iowa the appropriate venue for this case to proceed. See Med-Tec Iowa, 76 F. Supp.2d at 971.
B. ADM's Motion for Transfer of Slidell's Action, pursuant to 28 U.S.C. § 1404(a), or for a Stay Pending Resolution of the Action in the Northern District of Iowa
Alternatively, ADM asks this Court to transfer Slidell's action to the Northern District of Iowa, pursuant to 28 U.S.C. § 1404(a), or for a stay pending resolution of its action in the Northern District of Iowa. The Court will not consider ADM's alternative motion, because it has already determined above that this matter should be transferred pursuant to the first-filed rule.
C. Slidell's Motion to Enjoin ADM's Action in the Northern District of Iowa
Slidell asks this Court to enjoin ADM from pursuing its action in the Northern District of Iowa. Slidell did not brief this motion, and instead seems to rely on its other arguments to carry it implicitly. Slidell's motion for injunctive relief must be denied for the same reasons that ADM's motion to transfer has been granted.
Accordingly, based upon the files, records, and proceedings herein, IT IS HEREBY ORDERED that
1. Defendant's Motion to Dismiss or for Transfer to the United States District Court for the Northern District of Iowa is GRANTED, as follows: this matter shall be transferred to the United States District Court for the Northern District of Iowa.
2. Defendant's alternative Motion to Transfer Slidell's action to the Northern District of Iowa, pursuant to 28 U.S.C. § 1404(a), or for a Stay pending resolution of its action in the Northern District of Iowa is moot.
3. Plaintiff's Motion to Enjoin Defendant's Action in the Northern District of Iowa is DENIED.