Summary
finding the defendant's letter — notifying the plaintiff that it would seek a court order if the plaintiff did not take action by a certain date — constituted notice
Summary of this case from Hilliard v. Credit Suisse First Boston LLCOpinion
Case No. 1:04CV114 CDP.
November 9, 2004
MEMORANDUM AND ORDER
This matter is before me on defendant Sabinsa Corporation's motion to dismiss the plaintiff Creative Compounds' complaint for declaratory judgment, or in the alternative, to transfer the plaintiff's action on the basis of forum non conveniens. The facts of this case indicate that the plaintiff's declaratory judgment action serves no purpose other than to deprive the real plaintiff, Sabinsa, of its choice of forum. I will therefore grant the defendant's motion to dismiss.
BACKGROUND
Sabinsa, a New Jersey corporation with its principal place of business in New Jersey, manufactures and markets herbal extracts and chemicals used in nutritional supplements. On May 15, 2001, the United States Patent and Trademark Office granted Sabinsa the trademark FORSLEAN for a natural extract of coleus forskohlii root.
Creative is a Nevada limited liability company with its principal place of business in Scott City, Missouri. Sabinsa alleges that since early 2004, Creative has been infringing upon the FORSLEAN trademark by selling an extract of the coleus forskohlii root under the name FORSTHIN.
On August 20, 2004, Sabinsa sent a cease and desist letter to Creative demanding that Creative refrain from using the name FORSTHIN in the sale of its coleus forskohlii root extract. In this letter, Sabinsa stated that it would seek a court order immediately enjoining the use of the name FORSTHIN if Creative did not take action by August 26, 2004.
Creative's attorney responded on August 23, 2004, and inquired into the seriousness of Sabinsa's letter. In this phone conversation, Sabinsa made it clear that it would not resolve this dispute short of a complete discontinuation of Creative's use of the FORSTHIN name. Creative did not respond to Sabinsa by the August 26 deadline, and instead filed this declaratory judgment action on August 27, 2004. On August 31, 2004, three days after learning of this declaratory judgment action, Sabinsa filed a complaint against Creative in the United States District Court for the District of New Jersey alleging violations of the Lanham Act, New Jersey state law, and common law.
DISCUSSION
Creative brought this suit pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201. The Act grants the district court the discretion to hear, stay, or dismiss declaratory judgment actions brought before it. 28 U.S.C. § 2201(a). The Supreme Court has defined the Act as "an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant."Public Service Comm'n of Utah v. Wycoff Co., 344 U.S. 237, 241 (1952). This discretion is guided by the first-filed rule, which gives priority to the party who first establishes jurisdiction.Northwest Airlines, Inc. v. American Airlines, Inc., 989 F.2d 1002, 1006 (8th Cir. 1993). The first-filed rule is not absolute, however, and "will not be applied where a court finds `compelling circumstances' supporting its abrogation." Id.In Northwest Airlines, the Eighth Circuit held that the fact that the first-filed action is one for declaratory judgment sends up a "red flag" that "compelling circumstances" may justify an exception to the first-filed rule. Id. at 1007. Courts have found such exceptions and have dismissed first-filed declaratory judgment actions when the facts suggest the action was an attempt to deprive the real plaintiff of his or her choice of forum by winning a race to the courthouse. See e.g. Solna Web, Inc. v. Printed Media Services, Inc., 1990 WL 357918, at *3 (W.D.Mo. 1990).
For several reasons, the facts of this case suggest that Creative's declaratory judgment action serves no purpose other then to deprive Sabinsa, the real plaintiff in this dispute, of its choice of forum. Accordingly, I will grant Sabinsa's motion to dismiss.
First, Creative's action will not further the purposes of the Declaratory Judgment Act. In Koch Engineering Co., Inc. v. Monsanto Co., the court dismissed a first-filed declaratory judgment action because it furthered none of the goals of the Act. 621 F. Supp. 1204, 1207 (E.D.Mo. 1985). The court held that the purpose of the Act was "to provide a remedy which would `minimize the danger of avoidable loss and the unnecessary accrual of damages and to afford one threatened with liability an early adjudication without waiting until his adversary should see fit to begin an action after the damage has accrued.'" Id. at 1206 (quoting Wright Miller, Federal Practice and Procedure § 2751 at 569 (1983)). The plaintiff in Koch failed to identify any loss that could have been avoided through the use of the Declaratory Judgment Act. Thus, the court concluded that the first-filed suit represented "only a race to the courthouse."Id. at 1207. See also Eveready Battery Co., Inc. v. Zinc Products Co., 21 F. Supp. 2d 1060, 1062 (E.D.Mo. 1998) (transferring a first-filed declaratory judgment action when the plaintiff failed to demonstrate that an immediate resolution of the matter was necessary).
Similarly, the facts in this case do not suggest that Creative faced an opponent that intended to delay legal action while damages unnecessarily accrued. Indeed, Sabinsa was clear and consistent from the outset of this dispute that if Creative did not comply with its cease and desist letter within six days, Sabinsa would take legal action. Sabinsa could not have taken a more firm and expeditious approach to resolve this dispute.
Second, the facts indicate that Creative's declaratory judgment action was filed in anticipation of litigation. In Northwest Airlines, the Eighth Circuit examined the words and actions of the defendant to conclude that a first-filed declaratory judgment action had not been filed as a race to the courthouse. 989 F.2d at 1007. The defendant in Northwest Airlines sent a letter to the plaintiff suggesting that it might bring legal action, but "gave no indication that a lawsuit was imminent." Id. (emphasis added). Once the plaintiff's declaratory judgment action had been filed, the defendant waited six weeks before filing its own lawsuit. These facts convinced the court that the first-filed action could not have been filed in anticipation of litigation because the second-filed action "was not truly contemplated until after [the plaintiff] had filed its action." Id.
In contrast, the words and actions in Serco Services Co., LP v. Kelley Co., Inc. convinced the Federal Circuit to uphold the district court's finding that a firstfiled declaratory judgment action was filed in anticipation of litigation. 51 F.3d 1037, 1040 (Fed. Cir. 1995). The defendant in Serco Services had sent the plaintiff a cease and desist letter promising legal action if the plaintiff did not discontinue its alleged infringement within 12 days. The plaintiff responded by filing a declaratory judgment action just before the deadline. The defendant filed its own lawsuit three days later. Id. at 1038.
Sabinsa's words and actions in this case mirror those taken by the defendant in Serco Services. Sabinsa's cease and desist letter did not propose legal action as a possible result if Creative did not conform its conduct by August 26, 2004. Rather, Sabinsa guaranteed prompt legal action against Creative. See PCL Construction Services, Inc. v. Rainforest Café, Inc., 2002 WL 122612, at *3 (D. Minn. 2002) (dismissing a first-filed declaratory judgment action where the opposing party had "unequivocally stated . . . that it would likely resort to litigation to recover the money it demanded."). Sabinsa fulfilled this guarantee by filing its lawsuit five days after the deadline had passed, and four days after Creative filed its declaratory judgment action. Unlike the six-week delay in Northwest Airlines, this quick response demonstrated Sabinsa's contemplation of legal action well in advance of Creative's declaratory judgment action. These facts indicate that Creative's declaratory judgment action was an attempt to beat Sabinsa's inevitable lawsuit in a race to the courthouse.
Finally, the interests of justice weigh in favor of resolving this dispute in the New Jersey District Court. While the potential witnesses appear evenly distributed between Missouri and New Jersey, several factors support deference to the secondfiled lawsuit. First, Sabinsa's New Jersey lawsuit contains a New Jersey state law claim, one not included in Creative's declaratory judgment action. Second, the real plaintiff in this dispute is Sabinsa, and without more facts to support of the use of the Declaratory Judgment Act, the real plaintiff's choice of forum should be honored. See Prudential Ins. Co. of Am. v. Doe, 140 F.3d 785, 790 (8th Cir. 1998) ("We are mindful of the general proposition that declaratory judgments are not to be used defensively to deny a prospective plaintiff's choice of forums.").
In sum, the Declaratory Judgment Act was designed to ensure expeditious and complete resolutions of real controversies. The suit Sabinsa has filed in the United States District Court in New Jersey will accomplish these same goals, and more importantly, will honor the choice of forum of the real plaintiff in this dispute, Sabinsa.
Because I grant Sabinsa's motion to dismiss, there is no need to address the alternative motion for a transfer.
Accordingly,
IT IS HEREBY ORDERED that the defendant Sabinsa Corp.'s motion to dismiss [# 8] is granted.
A separate Order of Dismissal in accord with this Memorandum and Order is entered this same date.