Opinion
No. C 03-5574 MHP
March 8, 2004
MEMORANDUM AND ORDER Motion to Stay
On December 11, 2003, plaintiffAlibaba.com, Inc. ("Alibaba") filed a complaint in this court against defendant Litecubes, Inc. ("Litecubes"). In substantial part, Alibaba's complaint alleges that Litecubes violated section 2 of the Sherman Act, 15 U.S.C. § 2, and various provisions of California law when it attempted to monopolize the market for "illuminated ice cube" art on the basis of a putatively invalid copyright. For this supposed misconduct, Alibaba seeks a series of declaratory judgments, restitution, compensatory damages, treble punitive damages, and all relevant costs and fees. Now before the court is Litecubes' motion to stay this action pending disposition by another federal court of a pair of motions filed in a related suit. The court has considered the parties' arguments fully, and for the reasons set forth below, the court rules as follows.
Unless otherwise noted, the factual background is culled primarily from the parties' moving papers.
Alibaba is the proprietor of www.alibaba.com," an internet site designed to allow "business-to-business" marketing and commerce across a broad range of product categories. See Compl., ¶¶ 7-10. Within the last year, a number of companies have used the www.alibaba.com platform to sell illuminable ice-cube sculptures, that is, somewhat artistic forms displaying light cast through cubes of synthetic ice. See Cutler Decl., ¶ 3. Litecubes is a prominent designer of such ice-cube sculptures, and it claims to own a copyright registration for such designs. See id. at ¶ 2: cf. Pl.'s Opp. at p. 3 (contesting Litecubes' copyright ownership). After learning of the sales on Alibaba's website, Litecubes sent Alibaba a series of "take down" letters, asking Alibaba to stop auctioning ice cube sculptures altogether; Litecubes also provided copies of its copyright registration. Id. Alibaba did not respond to any of Litecubes' letters, nor did it take steps to prevent subsequent sculpture sales. Id. at ¶ 4.
Alibaba is a Delaware corporation with its principal place of business in Newark, California. See Compl., ¶ 7.
On October 3, 2003, Litecubes filed an action in the United States District Court for the Eastern District of Missouri, claiming that Alibaba had infringed-and continues to infringe-Litecubes' copyright. Id. Over two months later, on December 11, 2003, Alibaba filed this action in this court. On the same day, Alibaba also filed a pair of motions in the Eastern District of Missouri, the first asking that court to dismiss Litecubes' suit outright (either for failure to state a claim and for lack of personal jurisdiction), the second asking that court to transfer the Missouri lawsuit to the Northern District of California. Id at ¶¶ 5-7; see Fed.R.Civ.P. 12(b)(2) and 12(b)(6). The Eastern District of Missouri has set a briefing schedule for both of Alibaba's motions, both of which Litecubes opposes; Litecubes' responses to both of Alibaba's motions were due by February 15, 2004. Id. Litecubes has now asked this court to stay the proceedings in this action until the Eastern District of Missouri resolves the motions pending there.
DISCUSSION
District courts have long retained substantial discretion to stay civil actions where "it is efficient for [the court's] docket and [where it is] the fairest course . . . pending resolution of independent proceedings which bear upon the case." Yong v. I.N.S., 208 F.3d 1116 (9th Cir. 2000) (citation omitted). Where two superficially similar actions have been filed in separate federal courts, courts have often looked to the so-called "first-to-file" to determine if a stay of the latter-filed action is appropriate. Under this first-to-file rule, stays are typically appropriate where three factors are present: one, the action to be stayed was filed after the filing of the related action; two, the two actions involve significantly similar parties; and, three, the two actions involve significantly similar issues. See, e.g., Alltrade, Inc. v. Uniweld Products. Inc., 946 F.2d 622, 623 (9th Cir. 1991). This rule is not to be disregarded "lightly," though courts have not applied it mechanically, either. See Church of Scientology v. United States Dep't of the Army. 611 F.2d 738, 750 (9th Cir. 1979) (observing that, in this context, "courts are not bound by technicalities").
If a party has acted in bad faith, if the first-filed suit is plainly anticipatory, or if a party has engaged in transparent forum shopping, the first-to-file rule may be "relax[ed]." See, e.g., Ward v. Follett Corp., 158 F.R.D. 645 (N.D. Cal. 1994) (Whyte, J.) (adding that the rule can also be "relax[ed]" where the "balance of convenience weighs in favor of the later-filed action"); see also Alltrade. Inc., 946 F.2d at 628 ("[D]istrict court judges can, in the exercise of their discretion, dispense with the first-filed principle for reasons of equity. . . . The decision and the discretion belong to the district court.").
All three parts of the first-to-file test are satisfied here. Neither party disputes that Litecubes' filing of a complaint in the Eastern District of Missouri predated Alibaba's filing of a complaint in this court. See Cutler Decl., ¶¶ 4-5; cf Alltrade. Inc., 946 F.2d at 623. Nor does either party legitimately dispute the congruence the parties and the core issues (viz., the validity of Litecubes' copyright) in the two actions. Alibaba does, to be sure, assert that the two actions involve "different factual and legal issues."See Pl's Opp at p. 5. But Alibaba does not identify-let alone discuss-factual and legal issues that are actually "different"; instead, Alibaba relies on an elliptical claim that the relief sought here is more expansive than that sought in Missouri. Such claims do not prove the issues (or parties) different. In fact, Alibaba itself has expressly acknowledged the similitude of the relevant issues two times, once in the "Notice of Pendency of Other Actions" filed with this court, and once in the motion to transfer submitted to the court in Missouri. See Notice of Pendency, p. 2 ("Both Alibaba's action in this District and Litecubes' action in the Eastern District of Missouri involve a common nucleus of law and fact..") (emphasis added); Cutler Decl., Exh. A (Alibaba's Motion to Transfer) ("Litigation between the same parties involving the same issue copyright claims — is also pending [in the Northern District of California].") (emphasis added); see also Civ. Local R. 3-13. Under the standard first-to-file test, then, a temporary stay is appropriate.
In this sense, Alibaba is attempting to have it both ways: On the one hand, when asking the Eastern District of Missouri to transfer the first-filed action to this court, Alibaba stresses the similarity of the two cases; on the other, when contesting Litecubes' request to stay the action before this court, Alibaba emphasizes the two cases' supposed dissimilarity. It is, at bottom, a facile attempt to play both sides of the relevant fence, and the court need not countenance it here.
That many courts seem to consider antitrust counterclaims (like those at issue in the Missouri action) to be compulsory when arising out of a common nucleus of fact only bolsters this conclusion.See Fed.R.Civ.P. 13; Minnetonka v. Sani-Fresh Int'l. Inc., 103 F.R.D. 377, 379-80 (D. Minn. 1984) (citation omitted);see also Adam v. Jacobs. 950 F.2d 89, 93 (2d Cir. 1991) (noting that "once a court becomes aware that an action on its docket involves a claim that should be a compulsory counterclaim in another pending federal suit, it will stay its own proceedings") (citation omitted); cf.Hydranautics v. Filmtec Corp., 70 F.3d 533, 536 (9th Cir. 1995) (holding that "[a] claim that patent infringement litigation violated an antitrust statute is a permissive, not a mandatory, counterclaim in a patent infringement case . . .") (emphasis added). Alibaba is correct, of course, that this court is not bound by theMinnetonka decision, just as Alibaba is correct that parts of California law may ultimately obtain. See Pl.'s Opp. at p. 6. But Alibaba's observations, however valid, are at best orthogonal to the relevant issue. The two actions involve the same parties and the core same issues. Alibaba has conceded as much, and the nuances of the particular counterclaims that may be brought do not undercut the consequent first-to-file conclusion.
Furthermore, Alibaba's later-filed suit is the kind of which affirmative defenses and counterclaims are made. It seeks declaratory relief of non-infringement and invalidity; it asserts what is often a counter-claim in infringement actions, an antitrust claim; and, for "good" measure it adds a claim under section 17200 of the California Business Professions Code. It is very telling, and the court notes, that the lost race to the court house was responsive and defensive to Litecubes Missouri action.
The court is mindful, of course, that Litecubes' suit in Missouri may suffer a number of jurisdictional shortcomings. According to Alibaba, in fact, neither the parties nor the underlying conduct have much, if anything, to do with Missouri, suggesting that the case should not be before that court and that Litecubes has engaged in a "rank example of forum shopping." See Pl's Opp. at p. 4-5 (claiming that only Litecubes' attorney has any connection to Missouri). Alibaba's jurisdictional theories may be correct; they may not. Either way, Alibaba has made identical arguments before the Missouri court, see. e.g., Pl's Opp., Exh. 1, and this court sees no reason to preempt that court's consideration of the relevant jurisdictional issues. If the Missouri court lacks jurisdiction (whether personal or subject matter), that court will grant Alibaba's now-pending motion to dismiss pursuant Federal Rule of Civil Procedure 12(b)(2); likewise, if the Missouri court believes that Litecubes has failed to state a colorable claim or that the action should be transferred, that court will grant Alibaba's related now-pending motions. This court need not-and should not-make such determinations on the Missouri court's behalf, jumping unnecessarily into the parties' race to two separate courthouse doors.
The Supreme Court has "made quite clear that to permit a situation in which two cases involving precisely the same issues are simultaneously pending in different District Courts leads to the wastefulness of time, energy and money." Ferens v. John Deere Co., 494 U.S. 516, 531 (1990) (citation omitted). All of the issues Alibaba asks this court to address (e.g., copyright validity, forum shopping, inconvenience, the Missouri court's jurisdiction) have been raised before the court in Missouri. See Alltrade. Inc., 946 F.2d at 628 (noting that issues of convenience and the like typically "should be addressed to the court in the first filed action"). Little, if anything, will be gained by miring this court in concurrent consideration of questions already before another federal court, especially during this preliminary phase of the litigation. Sec Government Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998) (citations omitted); Church of Scientoloev. 611 F.2d at 750 ("Comity works most efficiently where previously-filed litigation is brought promptly to the attention of the [second] district court, and [that] court defers") (emphasis added). The Missouri court will no doubt resolve the relevant issues in due course; until it does, this court finds a temporary stay of this action appropriate. CONCLUSION
It is worth noting that a stay offers a particularly equanimous course of action. The court has not dismissed Alibaba's action outright. Cf. Alltrade. Inc., 946 F.2d at 628-29 (reversing a dismissal and counseling the use of stays instead). Nor has the court addressed any of the underlying legal or factual issues. Should such review be necessary (in light of the Missouri court's action), this court will consider those issues at an appropriate time.
Litecubes' motion to stay this action is GRANTED. The stay shall remain in effect at least until the Eastern District of Missouri resolves Alibaba's motions to dismiss or to transfer in the parties' separate lawsuit.
IT IS SO ORDERED.