Se. Power Grp., Inc. v. SAP Am., Inc.

SOUTHEAST POWER GROUP, INC.,AKA SOUTHEAST DEISEL CORP., Plaintiff, v. SAP AMERICA, INC. Defendant.

Civil No. 2:20-cv-00398-JMG

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

August 18, 2020

MEMORANDUM OPINION

Currently before this Court are four motions: SAP's motion to dismiss for failure to state a claim (ECF No. 6); Southeast's motion to stay pending appeal (ECF No. 10); Southeast's motion to stay discovery pending appeal (ECF No. 23); and Vision 33's motion to quash or stay SAP's subpoena duces tecum (ECF No. 32). For the reasons explained below, the Court will GRANT the motions to stay and DENY without prejudice the motion to dismiss and motion to quash or stay subpoena duces tecum.

I. BACKGROUND

On November 21, 2018, Southeast Power Group, Inc. AKA Southeast Diesel Corp. ("Southeast") filed a complaint against SAP America, Inc. ("SAP") and Vision 33 in the Florida Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida, Case Number 2018-03211-CA-01 ("the Initial Florida Action"). See SAP Mot. to Dismiss Ex. A, ECF No. 6. In the Initial Florida Action, Southeast alleged a breach of contract claim against Vision 33, a breach of contract (express warranty) claim against SAP, and negligence claim against SAP concerning SAP's "Business One Enterprise Resource Planning" software product and installation of that product by Vision 33. See id.

On December 21, 2018, SAP removed the case to the United States District Court for the Southern District of Miami/Dad Division based on diversity of citizenship and the alleged amount in controversy exceeding $75,000.00 ("the Removed Florida Action"). See id. at 3; Pl.'s Mot. to Stay Discovery at 2, ECF No. 23. This removed case, number 18-26395-CV-MGC came before District Court Judge Marcia G. Cooke. See SAP Mot. to Dismiss Ex. B, ECF No. 6.

In January 2019, both SAP and Vision 33 filed motions to dismiss. Pl.'s Mot. to Stay at 2, ECF No. 10. On June 19, 2019, the Florida District Court entered an order to show cause directing Southeast and Vision 33 to file a joint memorandum as to why the court should not dismiss the action because of the express terms of the forum selection clause of the agreement between Southeast and Vision 33 attached to the complaint, which identified California as the state with exclusive jurisdiction over any disputes brought under the contract. See id. at 2-3. The parties filed the joint memorandum on June 26, 2019. See id. at 3. Then Vision 33 filed a motion to dismiss for forum non conveniens on the same day. See id. At Southeast's request, oral argument was scheduled for August 28, 2019. See id. Afterward, Judge Cooke granted Vision's motion to dismiss for forum non conveniens, finding that the California forum selection clause in the contract between Southeast and Vision 33 was enforceable and that it also applied to SAP. See id. Ex. A.

The Removed Florida Action is currently on appeal. See Pl.'s Mot. to Stay Discovery at 3, ECF No. 23. Southeast filed its appeal to the Court of Appeals for the Eleventh Circuit, case number 19-13674-J ("the Florida Appeal"). See id. Southeast filed its initial brief on December 20, 2019, SAP and Vision 33 filed their answer briefs on March 2, 2020, and Southeast was to file its reply brief by May 1, 2020. See id.

II. PROCEDURAL HISTORY IN PENNSYLVANIA

On December 30, 2019, Southeast filed a complaint against SAP in the Court of Common Pleas, Philadelphia County. SAP's Mot. to Dismiss Ex. C. Southeast asserted a negligence claim and a negligent misrepresentation claim against SAP concerning installation of SAP's "BusinessOne Enterprise Resource Planning" software product by third party Vision 33. See id. at 7-9. On January 22, 2020, SAP removed the instant case to this court. See ECF No. 1.

Judge Timothy J. Savage held a pretrial conference with Southeast and SAP pursuant to Federal Rule 16 on February 12, 2020. See ECF No. 3. The case was reassigned to this Court by order dated February 26, 2020. See ECF No. 22.

SAP's motion to dismiss for failure to state a claim (ECF No. 6), Southeast's motion to stay pending appeal (ECF No. 10), Southeast's motion to stay discovery pending appeal (ECF No. 23), and Vision 33's motion to quash or stay SAP's subpoena duces tecum (ECF No. 32) are now pending.

III. LEGAL STANDARDS

A. First-Filed Rule

"The first-filed rule . . . gives courts 'the power' to enjoin the subsequent prosecution of proceedings involving the same parties and the same issues already before another district court." E.E.O.C. v. Univ. of Pa., 850 F.2d 969, 971 (3d Cir. 1988) (citation omitted). See also Crosley Corp. v. Hazeltine Corp., 122 F.2d 925, 929 (3d Cir. 1941) ("In all cases of concurrent jurisdiction, the court which first has possession of the subject must decide it.") (citation omitted). The rule "encourages sound judicial administration and promotes comity among federal courts of equal rank." E.E.O.C., 850 F.2d at 971.

When applying the first-filed rule, a district court "faces the discretionary choice whether to stay the second-filed action, transfer it, dismiss it without prejudice, or dismiss it with prejudice, thereby permanently terminating the case." Chavez v. Dole Food Co., Inc., 836 F.3d 205, 216 (3d Cir. 2016). The Third Circuit determined in Chavez that a dismissal with prejudice will "almost always" be an abuse of discretion, and a dismissal without prejudice "may create unanticipated problems," so "in the vast majority of cases, a court exercising its discretion under the first-filed rule should stay or transfer a first-filed suit." Id. at 220-21.

Courts in this district differ as to the degree of similarity required between the first- and second-filed actions. See Allegheny Cty. Employees' Retirement Sys. v. Energy Transfer LP, Civil Action No. 20-200, 2020 WL 1888950, at *3 (E.D. Pa. Apr. 16, 2020) (explaining mirror-image and broader application/flexible approach distinctions); see also Palagano v. NVIDIA Corp., Civil Action No. 15-1248, 2015 WL 5025469, at *2 (E.D. Pa. Aug. 25, 2015) (collecting cases). Most courts agree, however, that "the first-filed rule easily encompasses cases involving the same parties and the same transaction." Allegheny Cty., 2020 WL 1888950, at *3.

The "substantive touchstone of the first-to-file inquiry is subject matter." Shire U.S., Inc. v. Johnson Matthey, Inc., 543 F. Supp. 2d 404, 409 (E.D. Pa. 2008). The rule requires courts to "'fashion a flexible response to the issue of concurrent jurisdiction.'" Chavez, 836 F.3d at 216 (quoting E.E.O.C., 850 F.2d at 977). This more flexible approach has allowed courts in the Third Circuit to apply the rule not only to cases where the parties and issues perfectly align and the claims in the later-filed suit are a mirror image of the first, but also to those which are "substantially similar." See Panitch v. Quaker Oats Co., Civ. No. 16-4586, 2017 WL 1333285, at *2 (citing Palagano, 2015 WL 5025469, at *2); accord Allegheny Cty., 2020 WL 1888950, at *3. Nonetheless, courts interpreting the rule more narrowly only apply the first-filed rule "where earlier- and later-filed actions involved the same parties and arose out of the same transaction, agreement, or encounter." Landau v. Viridian Energy PA, 274 F. Supp. 3d 329, 333 (E.D. Pa. 2017) (citing Crosley Corp. v. Westinghouse Elec. & Mfg. Co., 130 F.2d 474 (3d Cir. 1942) (finding first-filed rule applied where declaratory judgment suit by alleged infringer against patent holder in one district came after first-filed patent infringement suit in another district)).

Exceptional circumstances that may prevent the court from applying the first-filed rule and instead retain jurisdiction include "inequitable conduct, bad faith, or forum shopping." E.E.O.C., 850 F.2d at 976. These circumstances are "rare and extraordinary." Id. The burden to show anexception applies falls to the party opposing application of the rule. D & L Distrib., LLC v. Agxplore Intern., LLC, 959 F. Supp. 2d 757, 766 (E.D. Pa. 2013).

B. Motion to Stay

A stay is an "extraordinary measure" demanding "compelling reasons for its issuance." United States v. Breyer, 41 F.3d 884, 893 (3d Cir. 1994). The power to stay is "incidental to the power inherent in every court to dispose of cases so as to promote fair and efficient adjudication." Landis v. North American Co., 299 U.S. 248, 254 (1936). The Supreme Court has set forth the relevant factors a district court should consider when there are concurrent jurisdictional issues. Although no one factor is determinative, these factors include: (1) inconvenience of the federal forum; (2) desirability of avoiding piecemeal litigation; and (3) order in which jurisdiction was obtained by the concurrent forums. Colorado River Water Conservation Dist., 424 U.S. 800, 817 (1976) (citations omitted).

IV. MOTION TO STAY PROCEEDINGS PENDING OUTCOME OF THE FLORIDA APPEAL

A. First-Filed Rule

The parties do not dispute that this action was filed second and that the issues in controversy are identical for the purposes of this motion. SAP opposes the first motion to stay because it argues that the case does not meet the requisite factors in Nigro v. Blumberg and argues that issues of comity do not exist when one case is on appeal. See Nigro v. Blumberg, 373 F. Supp. 1206, 1212-13 (E.D. Pa. 1974); SAP's Opp'n to Mot. to Stay at 3-5, ECF No. 17.

Both Southeast and SAP point to the factors outlined in Nigro v. Blumberg as the standard for deciding whether to stay a case where there are parallel proceedings in different forums. See Nigro, 373 F. Supp. at 1212-13; Pl.'s Mot. to Stay at 2, ECF No. 10; SAP's Opp'n to Mot. to Stay at 2, ECF No. 18. Although it is instructive, the court in Nigro considered staying a federal case pending the outcome of a state court parallel proceeding rather than applying the first-filed rulefor concurrent federal court proceedings, and this Court is not bound by the factors enumerated in that case.

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