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S.D.N.Y.: Although Elements of First-Filed Rule Satisfied, Court Declines to Transfer Second-Filed Case Due to Lack of Progress of First-Filed Case
Pippins v. KPMG LLP
This case was before the court on defendant’s motions to dismiss the case under the first-filed rule, or in the alternative to transfer the case to the site of the first-filed case, as well as defendant’s motion to stay the case, pending the outcome of a related appeal in the first-filed case. Citing the lack of progress in the first-filed case, the court denied the motions, although acknowledging that the underlying elements necessary for application of the first-filed rule were present.
The court reasoned:
“KPMG has met its burden of showing that the first-filed rule applies in this case by demonstrating that the Present Action and the California Action are nearly identical; however, due to the extensive delay in the California Action, the application of the first-filed rule is diminished.
Since the actions include the same parties and claims, the first-filed rule applies. However, application of the first-filed rule is diminished where there has been little progress in the first-filed action. Am. S.S. Owners Mut. Prot. & Indem. Ass’n, Inc. v. Lafarge N. Am., Inc., 474 F.Supp.2d 474, 489 (S.D.N.Y.2007), aff’d sub nom, N.Y. Marine & Gen. Ins. Co. v. Lafarge N. Am ., Inc., 599 F.3d 102 (2d Cir.2010); see Raytheon Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 306 F.Supp.2d 346, 352–53 (S.D.N.Y.2004). This case was filed by the California Plaintiffs in 2007. Since that time there has been no significant movement in the case, (Swartz Decl. Ex. 2.) and there has been no movement since the case was stayed in 2009 pending the outcome of Campbell by the Ninth Circuit. Thus, the presumption afforded the California Action is diminished here. If Plaintiffs can show the balance of convenience tilts even slightly in their favor, there is no reason for this court to transfer the action.
Plaintiffs have not identified any “special circumstances” that warrant deviation from the first-filed rule. However, the balance of convenience factors weigh in favor of maintaining this action in the Southern District of New York.”
The court also denied defendant’s motion for a stay, pending the outcome of a related appeal in the Ninth Circuit, noting:
“The first three factors are similar to those considered in the “first-filed” analysis, so those factors weigh in favor of proceeding with this action. The interests of the persons not parties to the civil litigation and the public interest also weigh in favor of denying Defendant’s motion to stay the action. As a collective action, the statute of limitations for opt-in plaintiffs continues to run until the plaintiffs opt-in to the action. 29 U.S.C. § 216(b); Hoffman v. Sbarro, Inc., 982 F.Supp. 249, 260 (S.D.N . Y.1997) (Sotomayor, J.). The FLSA has a statute of limitations of three years, two if “willfulness” is not found. Any further delay could prejudice the interests of potential opt-in plaintiffs, whose claims may stale. Public interest also favors the swift resolution of claims alleging violations of the FLSA.”
Arnold v. DirecTV, Inc.
This FLSA putative collective action was before the court on defendants’ motion to dismiss. The opinion is of interest, because it discusses an issue raised more and more frequently in recent years, given the proliferation of FLSA cases around the country- the so-called first-filed rule. Here, the defendants were sued in state court in the first action. Nine (9) days later, the plaintiffs in this case filed a second case, alleging similar claims. The defendants moved to dismiss this second-filed case, in favor of the first-filed case, in part based on the first-filed rule. The court rejected the applicability of the first-filed rule in this context and suggested that given the opt-in procedures applicable in FLSA cases, the first-filed rule may not be applicable to FLSA cases in general.
The court reasoned:
“To conserve judicial resources and avoid conflicting rulings, the first-filed rule gives priority, for purposes of choosing among possible venues when parallel litigation has been instituted in separate courts, to the party who first establishes jurisdiction.” Nw. Airlines, Inc. v. Am. Airlines, Inc., 989 F.2d 1002, 1006 (8th Cir.1993). The rule “is not intended to be rigid, mechanical, or inflexible, but is to be applied in a manner best serving the interests of justice.” Id. at 1005 (citation omitted). The prevailing standard is that “in the absence of compelling circumstances the first-filed rule should apply.” Id. at 1005 (citation omitted). However, district courts enjoy wide discretion in applying the first-filed rule. Id. at 1004.
Upon review of the record, the relevant case law, and the arguments of the parties, this Court declines to apply the first-filed rule to dismiss or stay the present case, for several reasons. Although several district courts have applied the first-filed rule to FLSA collective actions, see, e.g., Abushalieh v. Am. Eagle Exp., Inc., No. 10-211, 2010 WL 2301150 (D.N.J. Jun. 7, 2010), this Court is not convinced that the rule is a good fit for such actions. Generally, the rule is applied when the two cases are between the same parties litigating essentially the same issue, with one party being the plaintiff in one case and the defendant in the other, and vice versa. The decision of whether to apply the first-filed often turns on whether one party unfairly “raced to the courthouse.” See, e.g., Innovation Ventures, L.L.C. v. Custom Nutrition Labs., 534 F.Supp.2d 754 (E.D.Mich.2008). This is not the case here.
Application of the rule in the FLSA opt-in collective action context would, in theory, limit all potential members of a nation-wide class to opt into just one and the same collective action in all the federal district courts. Defendants have not pointed to anything in the FLSA itself that indicates that such a situation was intended. The Court notes that the prejudice claimed by Defendants resulting from having to defend against two (or more) contemporaneous lawsuits raising the same FLSA claims could be mitigated by Defendants availing themselves of multidistrict litigation options. See, e.g., In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953 (9th Cir.2009) (multidistrict litigation arising from three putative collective actions and one putative class action against home mortgage company on behalf of current and former home mortgage consultants seeking overtime pay).
In addition, the Court is not convinced that in this context, the date that Lang was filed in state court should be the operative date for determining which case, i.e., Lang or the present case, was filed first for purpose of the first-filed rule. Clearly, had Lang remained in state court, this Court would not dismiss or stay the present action in deference to Lang. In light of the fact that the first-filed rule is one of comity as between the federal district courts, it seems to this Court that the question is which federal court first obtained jurisdiction over the issues and parties. At least one federal district court has so held. See N. Am. Commc’ns, Inc. v. Homeowners Loan Corp., No. CIVA 3:2006-147, 2007 WL 184776, at *3 n. 1 (W.D.Pa. Jan. 22, 2007) (“In applying the first-filed rule, the first-filed case is the federal civil action which is first in time, whether by removal or the actual filing of a civil action in federal court. Since the rule the Court follows today is limited to federal district courts, the plaintiff in a state civil action can avoid being the second-filed matter by simply filing a complaint in a federal district court, not a state trial court at the outset.”).
Lastly, but not of least significance, the present case has a defendant, DTV Home Services II, LLC, that is not a defendant in Lang and Lang has two defendants that are not defendants here. Although DTV Home Services II, LLC, is a wholly-owned subsidiary of DIRECTV, it is a separate party. See Martin v. Citizens Fin. Group, Inc., No. 10-260, 2010 WL 3239187, at *2 (E.D .Pa. Aug. 13, 2010) (declining to apply first-filed rule to a FLSA case where one of the defendants was not a defendant in an earlier case raising the same issues); Gardner v. GC Servs., LP, No. 10-CV-997-IEG, 2010 WL 2721271, at *5-6 (S.D.Cal. July 6, 2010).
Although not determinative, the Court also notes that with the filing of the amended complaint in Lang, the nature of that suit has changed. In addition, the class action aspects of the two suits are different-one brought under Missouri law and one brought under Louisiana law. See Gardner, 2010 WL 2721271, at *5-6. In sum, the Court declines to dismiss or stay this action under the first-filed rule, and turns to consider the merits of Defendants’ motion to dismiss for failure to state a claim and on other grounds.”
Click Arnold v. DirecTV, Inc. to read the entire opinion.