Berisford Capital v. CENT. STATES, ETC. A. PENSION

• Decision Date: 20 January 1988
• Docket Number: No. 88 Civ. 0074 (CSH).,88 Civ. 0074 (CSH).
• Citation: 677 F. Supp. 220
• Parties: BERISFORD CAPITAL CORP., Plaintiff, v. CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, Defendant.
• Court: U.S. District Court — Southern District of New York

677 F. Supp. 220

BERISFORD CAPITAL CORP., Plaintiff, v. CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, Defendant.

No. 88 Civ. 0074 (CSH).

United States District Court, S.D. New York.

January 20, 1988.

Barry J. Mandel, Alan Dinkoff, Baer, Marks & Upham, New York City, for plaintiff.

Terence G. Craig, Bruce Perlin, Law Dept., Central States, Southeast and Southwest Areas Pension Fund, Chicago, Ill. and Bruce J. Douglas, Morgan, Lewis & Bockius, New York City, for defendant.

MEMORANDUM OPINION AND ORDER

HAIGHT, District Judge:

This matter comes before the Court on plaintiff Berisford Capital Corporation's ("Berisford") application, brought by order to show cause, for a temporary restraining order staying the time within which Berisford must commence arbitration pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1401, and enjoining defendant Central States Southeast and Southwest Areas Pension Fund ("Central States" or "Fund") from taking any action to collect from Berisford an alleged withdrawal liability or from declaring Berisford in default under that statute, 29 U.S.C. § 1399.

Plaintiff is a Delaware corporation with its principal place of business in New York. Defendant is a multiemployer pension plan within the meaning of 29 U.S.C. §§ 1002(37) and 1301(a)(3), and is administered from an office in Illinois.

A hearing on plaintiff's motion was held on January 12, 1988 at which all parties were represented by counsel. At the hearing, defendant Central States agreed to a fourteen day extension of the time within which Berisford must commence arbitration, and to voluntarily refrain from any attempts to collect the withdrawal liability or declare a default during the same period. By subsequent agreement, memorialized in a letter from Central State's counsel to the Court and dated January 13, 1988, the parties agreed to extend Berisford's deadline for commencing arbitration to April 1, 1988.

Defendant Central States, in response to plaintiff's motion, argues that the case is not properly before this Court and should be dismissed or stayed pending resolution of an action previously filed by Central States in the Northern District of Illinois. By its January 13, 1988 letter to the Court, counsel for Central States has pledged that in the event this action is stayed in favor of the Illinois action, Central States will not attempt to collect interim payments before April 1.

Plaintiff Berisford resists defendant's attempt to dismiss or stay the current action.

FACTUAL BACKGROUND

Based on memoranda submitted in connection with Berisford's order to show cause and correspondence submitted by both parties subsequent to the January 12 hearing, the following facts appear.

Early in 1985 plaintiff Berisford helped finance the acquisition by Coordinated Food Companies ("Coordinated"), a wholly-owned subsidiary of Syncom Corporation ("Syncom"), of four food companies. Berisford loaned $2 million to Syncom, guaranteed by both Coordinated and the new entity into which the acquired companies were subsequently merged, Hancock-Nelson Mercantile Company, Inc. ("Hancock-Nelson"). As part of the security for the loan, Syncom pledged to Berisford the stock Syncom held in Coordinated and Hancock-Nelson.

In January 1986 an involuntary petition was filed against the new combined entity, Hancock-Nelson, in the United States Bankruptcy Court for the District of Minnesota. Later, in April of that year, the fund filed a proof of claim for an unsecured debt of approximately $3.75 million allegedly owed by Hancock-Nelson for liability arising out of Hancock-Nelson's complete withdrawal from the Central States pension fund.

Apparently sometime after Hancock-Nelson's bankruptcy, Syncom defaulted on its loan to Berisford, resulting in Berisford's foreclosure and eventual public sale on May 5, 1986 of the collateral pledged by Syncom, including Syncom's stock in Coordinated and Hancock-Nelson. At the May 5 sale, Berisford was the successful bidder and thus acquired Syncom's stock in Coordinated and Hancock-Nelson. That acquisition, Berisford says, ultimately proved to be worthless.

The Fund then sought to assert its claim for withdrawal liability against Berisford by sending to Hancock-Nelson, on September 16, 1986, a notice and demand for payment of withdrawal liability in which Berisford was named as the "Controlling Employer." Although Berisford then formally requested that Central States review its determination of withdrawal liability, Berisford has yet to receive a formal response to its request. Pending a response to Berisford's request by Central States, the parties entered into a number of consensual extensions of Berisford's time for initiating arbitration, with the final extension expiring January 15, 1988.

DISCUSSION

The action brought by Berisford in this Court was filed on January 5, 1988. It seeks a declaratory judgment absolving Berisford of any obligation to satisfy the withdrawal liability alleged by the Fund. Central to Berisford's position is its claim that it acquired its interest in Hancock-Nelson after Hancock-Nelson withdrew from the pension plan, and that as a result it was not an "employer" at the time of the withdrawal and thus owes no liability.

The action brought in the Northern District of Illinois by Central States to collect the withdrawal liability was filed December 18, 1987, 18 days before the action in this Court. There is no dispute that the action brought in Illinois involves the same facts cited in Berisford's complaint.

The parties' most recent agreement extending Berisford's time to initiate arbitration and protecting Berisford from attempts to collect the debt allegedly owed to the Fund has for the time being mooted Berisford's request for a temporary restraining order. Thus the question now at issue is whether the action in this Court should be dismissed or stayed in favor of the previously-filed Illinois action, or proceed on the merits.

A.

The rule in the Second Circuit is that where two actions involve substantially the same issues, as a matter of sound judicial administration "the first suit should have priority, `absent the showing of balance of convenience in favor of the second action,' (citation omitted), or unless there are special circumstances which justify giving priority to the second." William Gluckin & Co. v. Int'l Playtex Corp., 407 F.2d 177, 178 (2d Cir.1969) (quoting Remington Products Corp. v. American Aerovap, Inc., 192 F.2d 872, 873 (2d Cir.1951). See also Mattel, Inc. v. Louis Marx & Co., 353 F.2d 421, 423 (2d Cir.1965), cert. dismissed, 384 U.S. 948, 86 S.Ct. 1475, 16 L.Ed.2d 546 (1966); Fort Howard Paper Co. v. William D. Witter, Inc. et al., 578 F.Supp. 301, 303 (S.D.N.Y.1984), aff'd in part, rev'd in part, 787 F.2d 784 (2d Cir. 1986); Donaldson, Lufkin & Jenrette, Inc. v. Los Angeles County, et al., 542 F.Supp. 1317, 1320-21 (S.D.N.Y.1982). This so-called "first filed" rule acts as a "presumption" that may be rebutted by proof of the desirability of proceeding in the forum of the second-filed action. Columbia Pictures Industries, Inc. v. Schneider, 435 F.Supp. 742, 747, 751 (S.D.N.Y.1977) ("an even or inconclusively tilted `balance of convenience' would ordinarily support application of the first-filed rule"), aff'd mem., 573 F.2d 1288 (2d Cir.1978).

However, the first-filed rule "is not to be applied in a mechanical way regardless of other considerations." National Patent Development Corp. v. American Hospital Supply Corp., 616 F.Supp. 114, 118 (S.D.N. Y.1984) (Weinfeld, J.) (quoting Hammett v. Warner Brothers Pictures, Inc., 176 F.2d 145, 150 (2d Cir.1949). "In deciding between competing jurisdictions, it has often been stated that the balancing of convenience should be left to the sound discretion of the district courts." William Gluckin & Co., 407 F.2d at 178. And where the parties engage in a race to the courthouse to achieve "first filed" status after a breakdown in settlement negotiations, as may well be the case here, "the courts should be concerned with what the interests of justice require and not with who won the race." National Patent Development Corp., at 118.

B.

Plaintiff Berisford, while conceding that its action was the later filed,¹ advanced the argument at the January 12 hearing that the "balance of convenience" in this case tips in favor of allowing the second-filed action to go forward in this Court despite the existence of the action previously filed in Illinois. Analogizing to the situation where a party moves to transfer under 28 U.S.C. § 1404(a), Judge Weinfeld has suggested a nonexclusive list of factors to be considered when a party moves to stay a second-filed action:

Among the factors to be considered are the convenience of the parties; the convenience of their witnesses; whether nonparty witnesses are subject to the subpoena power of the court insofar as their live testimony is more desirable than their deposition testimony; the availability of documentary evidence; the relative burdens of expenses on the parties; and the degree of interruption with executives' functions insofar as their testimony is required or desirable upon the trial proper.

National Patent Development Corp., 616 F.Supp. at 119. Berisford contends that it has no office or personnel in Illinois and that to litigate its case in that state would mean transporting documents, witnesses and attorneys from its headquarters in New York. (Transcript at 11.)

It is apparent that Berisford does not put great weight in this part of its case, for at the January 12 hearing Berisford agreed that this is not a case likely to involve the testimony of a significant number of witnesses or the production of great quantities of documents. (Transcript at 11-12.) If, however, the number of witnesses or documents did prove to be significant, it is worth noting that this action's geographical center of gravity, to the extent it...