United States District Court, S.D. Texas, Houston Division
MEMORANDUM OPINION AND ORDER
H. MILLER SENIOR UNITED STATES DISTRICT JUDGE.
before the court is a motion to dismiss, stay, or transfer
filed by defendant Jose Antonio Arochi. Dkt. 6. After
considering the motion, response, reply, and applicable law,
the court is of the opinion that the motion to dismiss, stay,
or transfer should be GRANTED and this case should be
TRANSFERRED to the U.S. District Court for the District of
is an attorney from Mexico who worked as a foreign associate
for Novak Druce Connolly Bove & Quigg, LLP from April
2013 through April 2015 and then claims to have worked for
the firm under an oral employment agreement through March of
2016. Dkt. 6; Dkt. 6, Ex. 1.. Arochi contends that he did not
receive agreed-upon commissions in November 2015. Dkt. 6.
Arochi hired an attorney to represent him on a wage claim
against the firm in March 2016, and the parties engaged in
sporadic negotiations through September 25, 2018. Dkt. 6, Ex.
2. Plaintiffs Novak Druce Connolly Bove & Quigg, LLP,
Burton Amernick, Tracy W. Druce, Gregory V. Novak, and Melvin
A. Todd (collectively, "Novak Druce"), filed this
declaratory judgment lawsuit on September 27, 2018 seeking
declarations that none of the named plaintiffs breached an
agreement with Arochi, that Texas law applies and they are
not liable to Arochi under District of Columbia law, that
Arochi must disgorge overpayments, that Novak Druce is
entitled to damages for abuse of process, and that Novak
Druce discharged all obligations to Arochi. Dkt. 1. Novak
Druce also seeks an appropriate award to compensate it for
the harm caused by Arochi. Id.
contends that he spent three years attempting in good faith
to resolve his dispute with Novak Druce and that as the
negotiations "neared the finish line, he put [Novak
Druce] on notice that suit would be filed on September 28,
2018, to comply with the applicable three-year statute of
limitations in the District of Columbia's Wage Payment
and Collections Law ["DCWPCL"]." Dkt. 6. Novak
Druce then, in an alleged "race to the courthouse,"
filed this lawsuit in the Southern District of Texas on
September 27, 2018. Id.; Dkt. 1. Arochi filed his
claim in the District of Columbia on September 28, 2018, and
he amended his complaint on March 26, 2019. Dkt. 6. His
amended District of Columbia complaint alleges six causes of
action: violations of the DCWPCL, breach of contract, fraud,
successor liability, and unjust enrichment. Id.
moves to dismiss or transfer to the District to Columbia
under the improper preemptive declaratory judgment action
exception to the first-to-file rule, and he alternatively
argues that this case should be stayed or transferred
pursuant to 28 U.S.C. § 1404(a) for the convenience of
the parties and in the interest of justice. Id.
Arochi contends that Novak Druce improperly filed this case
in an attempt to have Arochi's claims heard in its choice
of forum rather than in the District of Columbia.
Id. He also argues that the court should transfer
the case under 28 U.S.C. § 1404 if it chooses not to
dismiss the lawsuit. Id.
Druce opposes Arochi's motion, arguing that it filed this
lawsuit "following an impasse in settlement discussions
and repeated and increased threats from [Arochi]." Dkt.
9. Novak Druce contends that Arochi "forum shopped the
District of Columbia with the intent to invoke the
[DCWPCL]." Id. It argues that all of the claims
in the District of Columbia lawsuit arise from Arochi's
2013 employment contract, which was entered into in Houston,
Texas. Id. Novak Druce asserts that it filed a
motion to dismiss the District of Columbia case in light of
the first-filed Texas case and that this motion caused Arochi
to "ramp up" his "retaliatory behavior"
and file an amended complaint in the District of Columbia.
Id. Novak Druce argues that Arochi's allegations
of an improper anticipatory declaratory judgment for forum
shopping are not true, as it advised Arochi Novak Druce would
be filing a Texas lawsuit when negotiations reached an
impasse. Id. It contends both parties were
racing to the courthouse and the fact that Arochi lost the
race to the courthouse is not a sufficient basis for applying
the anticipatory exception to the first-to-file rule.
Id. (citing Twin City Ins. Co. v. Key Energy
Servs., No. H-09-0352, 2009 WL 1544255, at *5 (S.D. Tex.
Aug. 8, 2012) (Lake, J.) (noting that when the parties agree
that litigation can be initiated on a date certain, replacing
the "first-to-file rule with the second-to-file rule ...
would be illogical and unworkable"). Novak Druce also
points out that settlement negotiations had failed and argues
that the anticipatory exception should not apply in such a
circumstance. Id. It asserts that it did not lull
Arochi into inaction but rather informed him in advance that
it was filing the Texas action. Id. As far as
Arochi's request for a transfer of venue under §
1404, Novak Druce argues that a transfer of venue is
inappropriate because Arochi has not shown that a transfer is
in the interest of justice and the convenience factors weigh
against the transfer. Id.
district court "may not dismiss a request for
declaratory judgment relief' on the basis of whim or
personal disinclination, '" district courts have
discretion on whether to consider declaratory judgment
actions. Rowan Cos., Inc. v. Griffin, 876 F.2d 26,
28-29 (5th Cir. 1989) (quoting Hollis v. Itawamba Cty.
Loans, 657 F.2d 746, 750 (5th Cir.1981)). Courts may
dismiss declaratory judgment lawsuits when, for example,
there is a "pending state court proceeding in which the
matters in controversy between the parties may be fully
litigated," when "the declaratory complaint was
filed in anticipation of another suit and is being used for
the purpose of forum shopping," when "possible
inequities" permit "the plaintiff to gain
precedence in time and forum, ... or because of the
inconvenience to the parties or witnesses." Id.
Courts also should consider "whether retaining the
lawsuit in federal court would serve the purposes of judicial
economy." Travelers Ins. Co. v. La. Farm Bureau
Fed'n, 996 F.2d 774, 778 (5th Cir. 1993). This list
of considerations is "neither exhaustive, nor is it
exclusive or mandatory." Granite State Ins. Co. v.
Tandy Corp., 986 F.2d 94, 96 (5th Cir. 1992) (discussing
the factors outlined in Rowan).
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." Save
Power Ltd. v. Syntek Fin. Corp., 121 F.3d 947, 950 (5th
Cir. 1997). "Under the first-to-file rule, when related
cases are pending before two federal courts, the court in
which the case was last filed may refuse to hear it if the
issues raised by the cases substantially overlap."
Cadie Co. v. Whataburger of Alice, Inc., 174 F.3d
599, 603 (5th Cir. 1999). "The 'first to file'
rule is grounded in principles of comity and sound judicial
administration." Save Power Ltd., 121 F.3d at
950. The rule takes into account that federal courts of equal
rank should '"exercise care to avoid interference
with each other's affairs. '"Id.
(quoting West Gulf Maritime Ass'n v. ILA Deep
Sea Local 24, 751 F.2d 721, 728 (5th Cir. 1971)).
"The concern manifestly is to avoid the waste of
duplication, to avoid rulings which may trench upon the
authority of sister courts, and to avoid piecemeal resolution
of issues that call for a uniform result." West Gulf
Martime Ass'n, 751 F.2d at 729. "To avoid these
ills, a district court may dismiss [or transfer] an action
where the issues presented can be resolved in an
earlier-filed action pending in another district court."
Id. & n. 1.
the first-filed forum, this Court has the responsibility of
determining which action will proceed. Although the rule is
that the first-filed court should adjudicate the matter, this
Court can defer to the later-filed court when 'compelling
circumstances' are present." Serv. Corp.
Int'l v. Loewen Grp. Inc., No. H-96-3269, 1996 WL
756808, at *2 (S.D. Tex. Nov. 29, 1996) (Rainey, J.) (quoting
West Gulf, 751 F.2d at 729). Arochi argues that the
anticipatory-filing exception should prevent the court from
applying the first-to-file rule. This exception applies when
"a party files a declaratory judgment action in
anticipation of a suit by its adversary, which can create an
opportunity for forum-shopping." True View Surgery
Ctr. One, L.P. v. Goodman Glob. Holdings, Inc., No.
H-15-3287, 2016 WL 755494, at *6 (S.D. Tex. Feb. 24, 2016)
(Lake, J.); see Pac. Emp'rs Ins. Co. v. M/V Capt.
W.D. Cargill, 751 F.2d 801, 804 (5th Cir. 1985)
("This Court has stated that a proper factor to consider
in dismissing a declaratory judgment suit is whether the suit
was filed in anticipation of another and therefore was being
used for the purpose of forum-shopping."). "In such
cases, application of the' first-to-file' rule may
'deprive a potential plaintiff of his [or her] choice of
forum' and 'create disincentives to responsible
litigation by rewarding the winner of a race to the
courthouse. ""Doubletree Partners, L.P. v. Land
Am. Am. Title Co., No. 3-08-CV-1547-0, 2008 WL 5119599,
*3 (N.D. Tex. Dec. 3, 2008) (quoting Paragon Indus. L.P.
v. Denver Glass Mack, Inc., No. 3-07CV2183-M, 2008 WL
3890495, at *4 (N.D. Tex. Aug. 22, 2008)). But, merely filing
a declaratory action "is not in itself improper
anticipatory litigation or otherwise abusive forum
shopping." Sherwin-Williams Co. v. Holmes Cty.,
343 F.3d 383, 391 (5th Cir. 2003). Courts should consider
whether the first-filing party acted in bad faith by inducing
the other party to delay filing a lawsuit. Doubletree
Partners, 2008 WL 5119699, at *3. Additionally, courts
should take into account "the primary reason courts have
recognized the anticipatory suit exception to the
first-to-file rule is to avoid penalizing a party that has
attempted to settle a dispute out of court." Twin
City Ins. Co., 2009 WL 1544255, at *5. "In
determining whether to dismiss an action," it is
incumbent on the court to answer two questions: "(1) are
the two pending actions so duplicative or involve
substantially similar issues that one court should decide the
issues; and (2) which of the two courts should resolve the
case?'" Multi-Shot, LLC v. B&T Rentals,
Inc., No. H-09-3283, 2010 WL 376373, at *4 (S.D. Tex.
Jan. 26, 2010) (Rosenthal, J.) (quoting Excel Music, Inc.
v. Simone, No. 95-3626, 1996 WL 5708, at *5 (E.D. La.
court will first consider whether to apply the first-to-file
rule or whether it is more appropriate for the U.S. District
Court in the District of Columbia to consider the claims
under the anticipatory filing exception. It will then turn to
the § 1404 transfer analysis.
First to File Rule Versus ...