Stone v. Allied Indus. Supply

1

CHRISTOPHER STONE, Plaintiff, v. ALLIED INDUSTRIAL SUPPLY, LLC, Defendant.

Civil Action No. 22-5941 (ZNQ) (LHG)

United States District Court, D. New Jersey

April 6, 2023

NOT FOR PUBLICATION

OPINION

ZAHID N. QURAISHI UNITED STATES DISTRICT JUDGE

THIS MATTER comes before the Court upon a Motion to Transfer Case to United States District Court for the Western District of Michigan filed by Defendant Allied Industrial Supply, LLC (“Defendant”). (“Motion” ECF No. 10.) Defendant filed a Brief in Support of its Motion. (“Moving Br.”, ECF No. 10-1.) Plaintiff Christopher Stone (“Plaintiff”) filed a Memorandum in Opposition (“Opp'n”, ECF No 13), to which Defendant replied (“Reply”, ECF No 14).

The Court has carefully considered the parties' submissions and decides the Motion without oral argument pursuant to Federal Rule of Civil Procedure 78 and Local Civil Rule 78.1. For the reasons set forth below, the Court will GRANT Defendant's Motion to Transfer.

I. BACKGROUND AND PROCEDURAL HISTORY

The instant matter was removed from Hunterdon County on October 7, 2022. (ECF No. 1.) This action arises out of a dispute over Plaintiff's alleged unauthorized access, conversion, and use of property belonging to Defendant in order to compete against Defendant for business in violation of Plaintiff's contractual obligations and in contravention of federal and state law.^[1](Moving Br. at 1.) Specifically, Defendant contends that Plaintiff breached his obligations under a Non-Competition and Confidentiality Agreement entered into between the parties in the context of Defendant's purchase of the assets of Lehigh Valley Abrasives, LLC, a business founded by Plaintiff. (Id.; “Stuart Decl.”, ECF No. 10-2, ¶ 3.) On April 1, 2022, Defendant sent a letter to Plaintiff notifying him about its discovery of his breaches of his obligations under the NonCompetition and Confidentiality Agreements. (Stuart Decl., ¶ 3.) Plaintiff responded and the parties thereafter engaged in discussions to explore whether an amicable resolution of Defendant's claims might be reached and litigation avoided. (Id. ¶ 4.) In the April 1, 2022 letter, and in subsequent discussions with Plaintiff's counsel, Plaintiff was expressly advised that Defendant intended to commence litigation against him in the event a suitable resolution was not reached. (Id.)

On June 15, 2022, Plaintiff advised Defendant that he was unwilling to engage in mediation with any preconditions by Defendant. (Id. ¶ 7.) On June 28, 2022, Plaintiff filed this lawsuit in New Jersey State Court. (Id. ¶ 8.) On September 2, 2022, Defendant commenced an action against Plaintiff in the United States District Court for the Western District of Michigan.^[2] This matter was removed to this Court on October 7, 2022. (ECF No. 1.) On February 24, 2023, Defendant filed the instant Motion to Transfer. (ECF No. 10.)

II. LEGAL STANDARD

“For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.” 28 U.S.C. § 1404(a). Section 1404(a) vests “discretion in the district court to adjudicate motions to transfer according to an individualized, case-by-case consideration of convenience and fairness.” Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 23 (1988) (quoting Van Dusen v. Barrack, 376 U.S. 612, 622 (1964)). The purpose of this section is “to prevent the waste of time, energy and money and to protect litigants, witnesses and the public against unnecessary inconvenience and expense.” Van Dusen, 376 U.S. at 616 (quoting Continental Grain Co. v. Barge FBL-585, 364 U.S. 19, 26-27 (1960)).

In deciding motions to transfer venue, “courts have not limited their consideration to the three enumerated factors in § 1404(a) (convenience of parties, convenience of witnesses, or interests of justice).” Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995). Rather, courts have considered “all relevant factors to determine whether on balance the litigation would more conveniently proceed and the interests of justice be better served by transfer to a different forum.” Jumara, 55 F.3d at 879.

The first step in a court's analysis of a transfer motion is to determine whether venue would be proper in the transferee district. If the first prong of the inquiry is satisfied, the court then should determine whether a transfer would be in the interests of justice. Jumara, 55 F.3d at 879. This Court notes that the party moving to transfer a case on grounds of inconvenience has the burden of showing that the existing forum is inconvenient. Britamco Underwriters v. Raymond E. Wallace Productions, Inc., 56 F.Supp.2d 542, 545 (E.D. Pa. 1999).

III. DISCUSSION

Defendant claims that this matter should be transferred to the United States District Court for the Western District of Michigan because Defendant is-and at all times relevant was-based in Michigan, where the injury occurred, and where the parties agreed to litigate disputes arising out of the Non-Compete Agreement in its forum selection clause. (Moving Br. at 8.) In Opposition, Plaintiff claims that New Jersey is the only venue in which all claims indisputably belong because the 2014 Asset Purchase Agreement's (“APA”) venue provision indicates that the APA “is to be construed and interpreted in accordance with the laws of the State of New Jersey and subject to the sole jurisdiction of the State of New Jersey or the federal courts with jurisdiction in the same.” (Opp'n at 1.) Moreover, Plaintiff claims that the first-filed rule applies which “ordinarily counsels deference to the suit that was filed first, when two lawsuits involving the same issues and parties are pending in separate federal courts,” which would promote keeping the suit in New Jersey. (Id. at 16.) Lastly, the public and private interest factors support keeping the action in New Jersey because the APA forum selection clause controls, the dispute arose in New Jersey, and Defendant did not substantiate that the witnesses may be unavailable for trial in New Jersey. (Id. at 21-23.)

A. FIRST-FILED RULE

The Third Circuit has adopted the first-filed rule, which states that “in all cases of federal concurrent jurisdiction, the court which first has possession of the subject must decide it.” E.E.O.C. v. Univ. of Pennsylvania, 850 F.2d 969, 971 (3d Cir. 1988) (quoting Crosley Corp. v. Hazeltine Corp., 122 F.2d 925, 929 (3d Cir. 1941)). The rule “encourages sound judicial administration and promotes comity among federal courts of equal rank.” Id. at 971. Its primary purpose is to “avoid burdening the federal judiciary and to prevent the judicial embarrassment of conflicting judgments.” Id. at 977 (citing Church of Scientology v. United States Dept. of Army, 611 F.2d 738, 750 (9th Cir.1979)). Although exceptions to the rule are rare, it is not a “rigid or inflexible rule to be mechanically applied” because it is grounded in principles of equity. Id. at 976-77 (quoting Pacesetter Sys., Inc. v. Medtronic, Inc., 678 F.2d 93, 95 (9th Cir.1982)). Rare or extraordinary circumstances, inequitable conduct, bad faith, and forum shopping are proper bases upon which a court may decline to apply the first-filed rule. Id. at 976. For this exception to apply, courts in this district have recognized that “[s]ome evidence that the first-filed case was filed for the purpose of forum shopping . . . is necessary before courts find it was improperly anticipatory, and therefore warrant[s] departure from the first-filed rule.” Strategic Ben. Sols. Corp. v. Benefitelect, Inc., Civ. No. 19-14277, 2020 WL 4364329, at *3 (D.N.J. Jul, 29, 2020) (citing Eagle Pharm., Inc. v. Eli Lilly & Co., Civ. No. 17-6415, 2018 WL 3492145, at *4 (D.N.J. Jul. 20, 2018)).

Defendant argues that one such exception applies here. (Moving Br. at 7.) Namely, Defendant argues that Plaintiff engaged in bad faith forum shopping after he learned of Defendant's inclination to file suit against him in Michigan in the April 1, 2022 letter. (Id.) Plaintiff on the other hand argues that the April 1, 2022 letter did not threaten the imminent filing of a suit in Michigan. (Opp'n at 17.)

A brief review of the April 1, 2022 letter plainly threatens suit. Specifically, the letter from Defendant's attorney states “[o]ur client takes these violations very seriously, and it will take any and all steps necessary to enforce those rights, including but not limited to litigation.” (Stuart Decl. Ex. 1 at 2) (emphasis added). Seeing that Plaintiff does not contest that he received this correspondence, the letter alone is sufficient evidence that shows that Defendant intended to file a lawsuit against Plaintiff seeking to enforce its rights under the Non-Compete Agreement in the event the parties could not reach an agreement to mediate the parties' disputes. See Strategic Ben. Sols. Corp., 2020 WL 4364329, at *3 (holding that that the receipt of an email “indicating that Defendants were imminently going to file suit” was sufficient evidence to find that the first-filed rule did not apply because the plaintiff engaged in a bad faith anticipatory filing.)

Furthermore Plaintiff's filing of his preemptive declaratory judgment action in New Jersey not only speaks to his efforts to avoid facing Defendant's substantive claims in Michigan, but bears on the equities to be weighed by the Court when deciding this motion. The deference ordinarily afforded to a first-filed action is diminished where declaratory relief is sought and a second-filed action seeks substantive relief on the merits. See Tele Marketers, Inc. v. Inventel Prods., LLC, Civ. No. 16-2316, 2016 WL 4267950, at *5 (D.N.J. Aug. 10, 2016) (“The Third Circuit has affirmed a decision of this district declining to...