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Travelpass Group LLC v. Caesars Entertainment Corp.

United States District Court, E.D. Texas, Texarkana Division

August 29, 2019

TRAVELPASS GROUP LLC, PARTNER FUSION INC, RESERVATION COUNTER LLC, Plaintiffs,
v.
CAESARS ENTERTAINMENT CORPORATION, CHOICE HOTELS INTERNATIONAL INC, HILTON DOMESTIC OPERATING COMPANY INC., MARRIOTT INTERNATIONAL INC, RED ROOF INNS INC, SIX CONTINENTS HOTELS INC, WYNDHAM HOTEL GROUP LLC, HYATT CORPORATION, Defendants.

          ORDER

          ROBERT W. SCHROEDER III UNITED STATES DISTRICT JUDGE

         The above-entitled and numbered civil action was heretofore referred to United States Magistrate Judge Caroline M. Craven pursuant to 28 U.S.C. § 636. On May 9, 2019, the Magistrate Judge issued a Report and Recommendation (Docket No. 130) (“R&R”), recommending Defendants’ Motion to Transfer Venue (Docket No. 50) be denied. Defendants Caesars Entertainment Corporation, Choice Hotels International, Inc., Hilton Domestic Operating Company, Inc., Hyatt Corporation, Marriott International, Inc., Red Roof Inns, Inc., Six Continents Hotels, Inc. and Wyndham Hotel Group, LLC. (collectively, “Defendants”) filed objections to the Report and Recommendation (Docket No. 144). TravelPass Group, LLC, Reservation Counter, LLC and Partner Fusion, Inc. (collectively, “Plaintiffs”) filed a response to Defendants’ objections (Docket No. 145). The Court held a hearing August 15, 2019 and now conducts a de novo review of the Magistrate Judge’s findings and conclusions.[1]

         I. BACKGROUND

         This is an antitrust case involving an alleged conspiracy among hotel chains to eliminate interbrand competition for keyword internet searches. Orig. Compl., Docket No. 1 ¶ 1. Plaintiffs allege Defendants, conspiring with one another and “so-called gatekeeper online travel agencies (‘OTAs’) like Expedia and others,” “rigged bids and engaged in a group boycott to eliminate competing paid search advertisements displayed by internet search engines by agreeing not to bid on one another’s branded keywords.” Id. Plaintiffs assert four causes of action against Defendants, including (1) violation of the Sherman Act, 15 U.S.C. § 1 (per se bid rigging/group boycott/market division), (2) violation of the Sherman Act, 15 U.S.C. § 1 (unreasonable restraint of trade), (3) violation of related Utah Antitrust Act § 1 and (4) tortious interference with prospective business relations. Id. ¶¶ 164–94.

         Specifically, Plaintiffs allege the agreement orchestrated by Defendants reflects an unreasonable restraint of trade that is per se unlawful under Section 1 of the Sherman Act, 15 U.S.C. § 1. Id. ¶¶ 164–75. According to Plaintiffs, in carrying out their scheme, Defendants also tortiously interfered with Plaintiffs’ existing and potential economic relations with customers and potential customers by reducing customers’ ability to obtain information about available hotel rooms through branded keyword bidding by TravelPass. Id. ¶¶ 191–94.

         A. MOTION TO TRANSFER

         On February 5, 2019, Defendants filed a motion to transfer venue to the Northern District of Illinois. Docket No. 50. Defendants’ motion is based on a putative nationwide class action (Tichy v. Hyatt Hotels Corp., No. 1:18-cv-01959 (N.D. Ill.) (“Tichy action”)) pending in the proposed transferee court. According to Defendants, there is substantial similarity between the Tichy action and this case, and so, “transfer of this subsequently-filed action is proper pursuant to 28 U.S.C. § 1404(a) in the interests of justice and judicial economy, and also is called for under this Circuit’s first-to-file doctrine.” Docket No. 50 at 4.

         In support of their contention that there is substantial overlap between the cases, Defendants point out the Tichy action involves five of the hotel companies named as defendants in this case (Hyatt Corporation, Hilton Domestic Operating Company, Inc., Six Continents Hotels, Inc., Marriott International, Inc. and Wyndham Hotel Group LLC). Defendants argue the two lawsuits raise substantially the same allegations against the same hotel chains, arguing they violated the Sherman Act by engaging in a conspiracy to eliminate competition for keyword bidding and that they used their relationships with online travel agencies to further the alleged conspiracy. Id. at 13. Defendants further assert the Sherman Act claims involve common factual allegations that will involve common legal theories and evidence. Id. at 7–8.

         As such, Defendants contend this matter should be transferred to the proposed transferee court that is already acquainted with the relevant issues, “where most of the Defendants are already defending overlapping claims, and where the cases, including discovery and related procedures, may be coordinated efficiently.” Id. at 4. According to Defendants, without transfer, “there is a risk of inconsistent rulings in separate Districts concerning common issues-including the threshold issue of the existence of the alleged conspiracy between the Defendants.” Id. at 8. Defendants further argue maintaining this case in this district “would, in contrast, require duplicative time, energy, and resources from this Court, risk potentially inconsistent rulings, and impose added burden on litigants and witnesses.” Id. at 4.

         In their response, Plaintiffs argue Defendants focus on the so-called “threshold issue” of the existence of the alleged conspiracy but ignore other “numerous and complex issues” that differ between the two cases, including class certification (and whether the requirements of Rule 23 are met), antitrust injury, damages and the extent to which the three defendants here who are not defendants in the Tichy action participated in the alleged conspiracy. Docket No. 107 at 5.

         B. REPORT AND RECOMMENDATION

         On May 9, 2019, the Magistrate Judge issued her R&R regarding proposed findings of fact and recommendation that Defendants’ motion to transfer venue be denied. Docket No. 130. The Magistrate Judge considered the first-to-file rule before addressing Defendants’ request to transfer pursuant to § 1404(a). Id. at 3 (citing Needbasedapps, L.L.C. v. Robbins, No. 5:12cv527, 2013 WL 656169 (W.D. Tex. Feb. 20, 2013) (declining to address a motion to transfer pursuant to 28 U.S.C. § 1404(a) because transfer pursuant to the first-to-file rule was proper)). The Magistrate Judge set forth numerous cases addressing the first-to-file rule, many of which were considered in the context of the Fair Labor Standards Act (“FLSA”). Docket No. 130 at 8–14.

         The Magistrate Judge found that due to critical differences between this case and the Tichy action, the first-to-file rule does not compel transfer. Although both cases contain similar allegations regarding the existence of an unlawful agreement between the five hotel companies in violation of antitrust laws, the Magistrate Judge concluded the cases do not substantially overlap, noting this case involves different claims, issues and three additional defendants. Docket No. 130 at 14–17.

         The Magistrate Judge then applied the traditional rules of § 1404(a). After finding the case could have been brought in the Northern District of Illinois, the Magistrate Judge considered the applicable private and public interest factors. Id. at 21–32. She found one public interest factor favored transfer (local interest) and one public interest factor weighed against transfer (court congestion). She found all other factors are neutral. Balancing the factors, the Magistrate Judge concluded Defendants had not shown that transfer to the Northern District of Illinois is clearly more convenient. Id. at 33.

         II. OBJECTIONS

         In their objections, Defendants assert that transfer of this case to the Northern District of Illinois “is required by the first-to-file doctrine and 28 U.S.C. § 1404(a) to prevent the risk of inconsistent rulings concerning the common core issue, ensure judicial efficiency, and avoid needless duplication of discovery.” Docket No. 144 at 1. As argued by Defendants, the determination of whether there is sufficient evidence to demonstrate the existence of an unlawful agreement among the defendants “will entail a complex analysis given . . . the summary judgment framework for antitrust conspiracy cases” and “what will almost certainly be a formidable discovery record given the number of defendants and non-parties involved.” Id. Defendants argue the R&R erred in relying on “ancillary differences between this case and Tichy.” Id. at 2.

         Regarding the § 1404(a) analysis, Defendants argue the R&R erred in finding the private interest factor regarding the cost of attendance for parties and witnesses is neutral. Defendants maintain this conclusion fails to account for the burden to witnesses, including non-party witnesses, who will be required to travel twice and to different districts. Defendants further assert the R&R errs in finding the interest of justice and judicial economy factor neutral, despite acknowledging the overlap on the issue of the alleged conspiracy in the two cases. Finally, Defendants contend the R&R errs in finding the issue of court congestion weighs against transfer. According to Defendants, after adjusting for these errors, “there are at least three convenience factors favoring transfer, with the rest neutral; transfer is thus warranted under 28 U.S.C. § 1404(a).” Id. at 5.

         In their response to the objections, Plaintiffs state “the sole basis” for Defendants’ objections (and the underlying motion to transfer) is the pendency of the Tichy action involving an antitrust claim against some of the defendants in this case.[2] Docket No. 146 at 1 (emphasis in original). Plaintiffs assert the Magistrate Judge correctly found this case involves different claims and threshold issues, in addition to different parties, key third parties, witnesses and documents located throughout the country, with no “center of gravity” in any other district. Id. Plaintiffs maintain Defendants have not met their evidentiary burden of showing transfer would not be “clearly more convenient.”

         III. APPLICABLE LAW

         A. First-to-file rule

         The “Fifth Circuit adheres to the general rule that the court in which an action is first filed is the appropriate court to determine whether subsequently filed cases involving substantially similar issues should proceed.” Stannard v. Nat’l Indoor RV Centers, LLC, No. 4:18-CV-00366, 2018 WL 3608560, at *1 (E.D. Tex. July 27, 2018) (quoting Huntsman Corp. v. Int’l Risk Ins. Co., No. 1:08-CV-029, 2008 WL 1836384, at *5 (E.D. Tex. Apr. 22, 2008) (citing Save Power Ltd. v. Syntek Fin. Corp., 121 F.3d 947, 950 (5th Cir. 1997))). A second-filed court plays a limited role when presented with a motion to transfer or stay based on the first-to-file rule. Stannard, 2018 WL 3608560, at *1 (citing Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599, 605 (5th Cir.1999)). This role is to decide whether the moving party in the second-filed court has demonstrated a “substantial overlap” between the two suits. Id. If the moving party satisfies this overlap requirement, the second-filed court allows the first-filed court to “resolve the question of whether both [cases] should be allowed to proceed.” Id. “Therefore, the first-to-file rule not only determines which court may decide the merits of substantially similar issues, but also establishes which court may decide whether the second suit filed must be dismissed, stayed or transferred and consolidated.” Huntsman, 2008 WL 1836384, at *5 (citations omitted).

         “The rule does not require the cases to be identical. Instead, the crucial inquiry is one of substantial overlap.” Cirk Tek, LLC v. Ong Investments, LC, 212 F. Supp. 3d 709, 712 (W.D. Tex. 2016) (quoting Int’l Fidelity Ins. Co. v. Sweet Little Mexico Corp., 665 F.3d 671, 678 (5th Cir. 2011)). The two actions only need “involve closely related questions or common subject matter.” Sirius Computer Sols., Inc. v. Sparks, 138 F. Supp. 3d 821, 827 (W.D. Tex. 2015) (quoting Rooster Prods. Int’l, Inc. v. Custom Leathercraft Mfg. Co., ...


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