Med-Tec Iowa, Inc. v. Nomos Corp.
| Decision Date | 29 November 1999 |
| Docket Number | No. C99-4031-MWB.,C99-4031-MWB. |
| Parties | MED-TEC IOWA, INC., Clayton P. Korver II, Debra Korver, and Wayne Huisman, Plaintiffs, v. NOMOS CORPORATION and Med-Tec Acquisition, Inc., Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
Roger T. Stetson, Edward M. Mansfield, Belin Lamson McCormick Zumbach Flynn, Des Moines, IA, for Plaintiffs.
Sarah J. Kuehl, Heidman, Redmond, Fredregril, Patterson, Plaza & Dykstra LLP, Sioux, IA, Robert W. Doty, Jennifer M. Palmer, Cohen & Grigsby, PC, Pittsburg, PA, for Defendants.
This motion raises the novel issue of what import a federal district court sitting in diversity jurisdiction must accord the filing of a praecipe for writ of summons, a procedure peculiar to Pennsylvania law, in applying the federal first-filed rule. The defendants to this lawsuit are Pennsylvania residents and, having filed a praecipe for writ of summons in a Pennsylvania state court, contend that they have won the race to the courthouse. Defendants seek the dismissal or stay of this lawsuit in favor of the Pennsylvania litigation. The plaintiffs in this case, on the other hand, are Iowa residents and seek to litigate the dispute between the parties here, in this forum, where they commenced litigation by filing a complaint with this court. Resolution of defendants' motion to dismiss, or alternatively, to stay, requires the court to examine both the Colorado River abstention doctrine and the first-filed rule.
On April 27, 1999, plaintiffs Med-Tec Iowa, Inc., Clayton P. Korver II, Debra Korver and Wayne Huisman (collectively "Med-Tec" unless otherwise indicated) filed their complaint in this lawsuit against defendants Nomos Corporation and Med-Tec Acquisition, Inc. (collectively "Nomos" unless otherwise indicated). Subject matter jurisdiction is based on diversity of citizenship and sufficient amount in controversy. See 28 U.S.C. § 1332. In the complaint, Med-Tec seeks a declaratory judgment, pursuant to 28 U.S.C. § 2201, that Med-Tec is entitled to retain a $3,000,000.00 cash deposit made by Nomos in connection with an intended merger between Med-Tec and Nomos.
On June 28, 1999, Nomos filed its Motion To Dismiss, Or In The Alternative, To Stay Proceedings. In its motion, Nomos argues that the court should stay or dismiss this case pursuant to the Colorado River abstention doctrine. See Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). In the alternative, Nomos contends that this case should be dismissed or transferred to the United States District Court for the Western District of Pennsylvania under the first-filed rule and 28 U.S.C. § 1404(a).
Med-Tec filed a timely resistance to Nomos' motion, asserting that the Colorado River abstention doctrine is inapplicable here because there is no ongoing state action. Med-Tec further contends that under the first-filed rule this litigation should proceed here because the first complaint was filed with this court.
The court heard telephonic oral arguments on Nomos' motion on November 23, 1999. At oral arguments, plaintiff Med-Tec was represented by Edward M. Mansfield of Belin Lamson McCormick Zumbach Flynn, Des Moines, Iowa. Defendant Nomos was represented by Robert Doty of Cohen & Grigsby, P.C., Pittsburgh, Pennsylvania.
The court turns first to the factual background of this case. The court then turns to the legal analysis of Nomos' Motion To Dismiss, Or In The Alternative, To Stay Proceedings.
The factual background for disposition of these motions is based on the facts as alleged in Med-Tec's April 27, 1999, complaint, as well as undisputed facts drawn from the parties' supporting documents.
Plaintiff Med-Tec is an Iowa corporation with its principal place of business in Iowa. Plaintiffs Clayton Korver, Debra Korver, and Wayne Huisman are all residents and citizens of Iowa. Defendants Nomos and Med-Tec Acquisition are both Delaware corporations with their principal places of business in Pennsylvania.
On January 20, 1999, the parties entered into an Agreement and Plan of Merger ("the Agreement") under which Nomos would acquire Med-Tec Iowa, Inc. The Agreement provides, inter alia, as follows:
7.1 Certain Payments. On or before January 31, 1999, Parent or Acquisition shall pay $1,000,000.00 in cash to the Korver Stockholders (the "January Payment"). The parties hereto acknowledge and agree that in the event of any termination of this Agreement, or if for any other reason the Closing does not occur on or before March 31, 1999, the amounts paid by or on behalf of Parent or Acquisition to the Company and/or the Korver Stockholders prior to such date, including the $2,000,000.00 payment paid in November and the January Payment, shall remain the property of the Company or Korver Stockholders, as the case may be, and shall not be returnable or refundable for any reason to Parent or Acquisition or any other person.
The Agreement at ¶ 7.1. The Agreement contains a choice of law provision which provides that "the rights and obligations of all parties hereunder shall be construed in accordance with and governed by the internal laws of the State of Delaware, without giving effect to the conflict of law principles thereof."1 The Agreement at ¶ 9.4.
On March 22, 1999, Nomos filed a praecipe for writ of summons in the Court of Common Pleas of Allegheny County in the Commonwealth of Pennsylvania. Service of the writ was completed by the delivery of certified mail to Med-Tec Iowa, Inc. on April 19, 1999, Wayne Huisman on April 20, 1999, and Debra J. Korver on April 22, 1999. Clayton Korver accepted service on May 21, 1999.
On April 27, 1999, Med-Tec filed its complaint in this lawsuit against Nomos ("the Iowa lawsuit"). On May 20, 1999, Nomos filed its complaint in the Court of Common Pleas of Allegheny County in the Commonwealth of Pennsylvania ("the Pennsylvania lawsuit"). In the Pennsylvania lawsuit, Nomos alleges that Med-Tec has wrongfully withheld $3,000,000.00 in cash deposits made pursuant to the Agreement. Nomos asserts claims of breach of contract and wrongful enrichment against Med-Tec and seeks to recover the $3,000,000.00 in cash deposits.
On June 7, 1999, Med-Tec removed the Pennsylvania lawsuit to the United States District Court for the Western District of Pennsylvania. On June 14, 1999, Med-Tec filed a motion to dismiss, stay, or transfer venue of the Pennsylvania lawsuit. On June 28, 1999, Nomos filed a motion to remand the Pennsylvania lawsuit to state court. On October 7, 1999, the Honorable William L. Standish, United States District Court Judge for the Western District of Pennsylvania, denied Nomos' motion to remand the Pennsylvania lawsuit to state court.
In their motion to stay or dismiss, Nomos contends that this court should dismiss this federal lawsuit in this case and require Med-Tec to pursue its claims in the Pennsylvania lawsuit. Nomos also suggests that the court stay this federal case pending resolution of the Pennsylvania action. Nomos initially bases its request for dismissal or stay of Med-Tec's pending federal action on the abstention doctrine set forth in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). "Generally, as between state and Federal courts, the rule is that `the pendency of an action in the state court is no bar to proceedings concerning the same matter in the federal court having jurisdiction.'" Id. at 817, 96 S.Ct. 1236 (quoting McClellan v. Carland, 217 U.S. 268, 282, 30 S.Ct. 501, 54 L.Ed. 762 (1910)). In Colorado River, the Supreme Court identified several factors that counsel in favor of dismissal in situations involving the exercise of concurrent jurisdiction by federal and state courts, and promote the public interest in "`[w]ise judicial administration, ... conservation of judicial resources and comprehensive disposition of litigation.'" Id. at 817, 96 S.Ct. 1236 (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180, 183, 72 S.Ct. 219, 96 L.Ed. 200 (1952)). From Colorado River and its progeny, six factors have emerged for the court to consider in determining whether to stay or dismiss a federal suit out of deference to parallel litigation brought in state court:
"(1) whether there is a res over which one court has established jurisdiction, (2) the inconvenience of the federal forum, (3) whether maintaining separate actions may result in piecemeal litigation, unless the relevant law would require piecemeal litigation and the federal court issue is easily severed, (4) which case has priority — not necessarily which case was filed first but a greater emphasis on the relative progress made in the cases, (5) whether state or federal law controls, especially favoring the exercise of jurisdiction where federal law controls, and (6) the adequacy of the...
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