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Novak Druce Connolly Bove & Quigg, LLP v. Arochi

United States District Court, S.D. Texas, Houston Division

September 5, 2019

NOVAK DRUCE CONNOLLY BOVE & QUIGG, LLP, et al, Plaintiffs,
v.
JOSE ANTONIO AROCHI, Defendant.

          MEMORANDUM OPINION AND ORDER

          GRAY H. MILLER SENIOR UNITED STATES DISTRICT JUDGE.

         Pending 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 Columbia.

         I. BACKGROUND

         Arochi 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.

         Arochi 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.[1] Id.

         Arochi 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.

         Novak 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.

         II. Legal Standard

         While a 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).

         "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." 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.

         "As 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. 1996)).

         III. Analysis

         The 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.

         A. First to File Rule Versus ...


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