Bay Tek Entm't, Inc. v. Wedges & Ledges of Cal., Inc.

• Decision Date: 22 August 2019
• Docket Number: Case No. 18-C-1892
• Parties: BAY TEK ENTERTAINMENT, INC., Plaintiff, v. WEDGES & LEDGES OF CALIFORNIA, INC. and STEPHEN SHOEMAKER, Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

BAY TEK ENTERTAINMENT, INC., Plaintiff, v. WEDGES & LEDGES OF CALIFORNIA, INC.and STEPHEN SHOEMAKER, Defendants.

Case No. 18-C-1892

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN

August 22, 2019

DECISION AND ORDER OF DISMISSAL

Bay Tek Entertainment, Inc., a Wisconsin corporation that develops and manufactures arcade games, filed this action for declaratory relief against Wedges & Ledges of California, Inc., a company that also develops and sells arcade games, along with Stephen Shoemaker, Wedges & Ledges' president, seeking a determination that the parties never entered into a contractual relationship. Federal jurisdiction is predicated on 28 U.S.C. § 1332. The case is before the court on the defendants' motion to dismiss this action and the plaintiff's motion to transfer the mirror image action Shoemaker commenced against Bay Tek for breach of contract, which is currently pending in the United States District Court for the Central District of California, to this court. For the reasons that follow, the defendants' motion to dismiss will be granted and the plaintiff's motion to transfer will be denied as moot.

The case arises out of a series of business dealings between Bay Tek and Stephen Shoemaker between the summer of 2017 and October 2018 concerning the development and licensing of an arcade game that Shoemaker invented. On November 8, 2018, Shoemaker's attorney sent Bay Tek a detailed demand letter asserting that Bay Tek had breached the development and licensing agreement the parties had entered into in October 2017 during an in-person meeting in Redondo Beach, California, and demanding compensation for Bay Tek's breach of contract. In response, Bay Tek filed this action on December 1, 2018, seeking a declaration that no contract existed between the parties and that Bay Tek is not liable to Shoemaker or Wedges & Ledges. On January 11, 2019, Shoemaker sued Bay Tek in California state court for breach of contract and related claims based on the same series of events. Bay Tek removed Shoemaker's action to federal court where it was stayed on stipulation of the parties to allow informal discovery and settlement discussions.

The defendants assert that the court should not exercise jurisdiction over Bay Tek's complaint seeking declaratory relief in this court under the Wilton/Brillhart abstention doctrine because the case before the Central District of California is a parallel proceeding between the same parties addressing the same issues that would resolve the issues on the merits. See Wilton v. Seven Falls Co., 515 U.S. 277 (1995); Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942). Under the Wilton/Brillhart abstention doctrine, "district courts possess significant discretion to dismiss or stay claims seeking declaratory relief, even though they have subject matter jurisdiction over such claims." Envision Healthcare, Inc. v. PreferredOne Ins. Co., 604 F.3d 983, 986 (7th Cir. 2010) (internal quotation omitted). "This discretion arises from the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202 itself, which provides that district courts 'may declare the rights and other legal relations of any interested party seeking such declaration.'" Id. (quoting 28 U.S.C. § 2201(a)). "The discretionary nature of the Act led the Supreme Court to hold in Brillhart and Wilton that district courts have substantial discretion in deciding whether to declare the rights of litigants and may, in the sound exercise of their discretion, stay or dismiss an action seeking a declaratory judgment infavor of an ongoing state court case." Id. (citing Brillhart, 316 U.S. at 494-95; Wilton, 515 U.S. at 288).

The Seventh Circuit has explained that, in deciding whether to abstain under Wilton/Brillhart, a court should consider various factors, including:

whether the declaratory suit presents a question distinct from the issues raised in the state court proceeding, whether the parties to the two actions are identical, whether going forward with the declaratory action will serve a useful purpose in clarifying the legal obligations and relationships among the parties or will merely amount to duplicative and piecemeal litigation, and whether comparable relief is available to the plaintiff seeking a declaratory judgment in another forum or at another time.

Nationwide Ins. v. Zavalis, 52 F.3d 689, 692 (7th Cir. 1995). "This is an inherently discretionary call for the district court, 'because facts bearing on the usefulness of the declaratory judgment remedy, and the fitness of the case for resolution, are peculiarly within [its] grasp.'" Arnold v. KJD Real Estate, LLC, 752 F.3d 700, 707 (7th Cir. 2014) (quoting Wilton, 515 U.S. at 289). At the same time, the court has also made clear that, as a general rule, cases seeking only declaratory relief should generally give way to cases seeking the coercive relief in the form of damages. See Research Automation, Inc. v. Schrader-Bridgeport Int'l., Inc., 626 F.3d 973, 980 (7th Cir. 2010) ("Since Graybar Electric, we have made clear that where the facts of that case are replicated—that is, where the parallel cases involve a declaratory...