Nutrition & Fitness, Inc. v. Blue Stuff, Inc.

• Citation: 264 F.Supp.2d 357
• Decision Date: 19 May 2003
• Docket Number: No. 3:02-CV-237-MU.,3:02-CV-237-MU.
• Court: U.S. District Court — Western District of North Carolina
• Parties: NUTRITION & FITNESS, INC., Plaintiff, v. BLUE STUFF, INC., Defendant.

264 F.Supp.2d 357

NUTRITION & FITNESS, INC., Plaintiff, v. BLUE STUFF, INC., Defendant.

No. 3:02-CV-237-MU.

United States District Court, W.D. North Carolina, Charlotte Division.

May 19, 2003.

Charles A. Burke, David H. Read, Womble, Carlyle, Sandridge, and Rice, Winston-Salem, NC, for Plaintiff.

Daniel L. Tedrick, Hunton &Williams, Carlotte, NC, Robert B. Cordle, Mayer, Brown, Rowe & Maw, Charlotte, NC, James C. McMillan, Clifford C. Dougherty, III, Michael D. McClintock, McAfee & Taft, Oklahoma, City, OK, for Defendant.

ORDER

MULLEN, Chief Judge.

THIS MATTER is before the Court upon the Defendant's Motion to Dismiss and alternative Motion to Transfer Venue. Because the parties failed to adequately brief the transfer issue, the Court ordered further briefing of the factors weighing for and against transfer of this case to Oklahoma. The supplemental briefs have been filed, and the Court is now prepared to rule on the motions.

I. FACTS AND PROCEDURAL HISTORY

Defendant Blue Stuff, Inc. has manufactured and sold the health product "Blue Stuff and "Super Blue Stuff" since February 1, 1996, and claims to have trademarks and trade dress rights as to both products. On April 19, 2002, Plaintiff Nutrition and Fitness, Inc. ("NFI") filed three intent-to-use trademark applications with the United States Patent and trademark office as to three products that it intended to begin producing: "Super Blue-Emu," "Blue-Emu," and "Pain Solutions Super Strength Blue-Emu." On or about May 3, 2002, NFI began marketing and selling its "Blue-Emu" products in interstate commerce. Alleging false advertising, NFI filed suit against Blue Stuff, Inc. in this Court on June 12, 2002 ("the North Carolina action"), but did not at that time serve the summons and complaint on Defendant.

Without knowledge of the North Carolina action, Defendant Blue Stuff, Inc. filed a lawsuit against NFI in the United States District Court for the Western District of Oklahoma on September 19, 2002 ("the Oklahoma action"). The Oklahoma action alleged federal trademark infringement and false advertising pursuant to the Lanham Act, as well as state law trademark causes of action. Defendant served NFI with a summons and complaint on September 24, 2002. On September 25, 2002, more than three months after it had filed the North Carolina action, NFI finally served Defendant Blue Stuff, Inc. with a summons and complaint. Subsequent to serving Defendant, on October 2, 2002, NFI filed an amended complaint that put forward federal and state law trademark causes of action.

The instant dispute arises out of the above-described chain of events. Blue Stuff, Inc. filed its Motion to Dismiss with this Court based primarily on the ground that NFI's lawsuit constitutes an improper "hip pocket" filing that should be disregarded for purposes of the first-filed rule. It argues that this Court should dismiss the instant action, or in the alternative transfer it to United States District Court for the Western District of Oklahoma, where it filed its action. In opposition, NFI relies on the first-filed rule for the proposition that the lawsuit filed with this Court has priority over the Oklahoma action, and that Defendant's Motion to Dismiss must be denied. It further contends that transfer is inappropriate, primarily because its choice of forum, the Western District of North Carolina, is entitled to great deference.

In the Oklahoma District Court, NFI filed a motion to stay the Oklahoma action in favor of the North Carolina action. Judge Alley granted that motion in part, ruling that the Oklahoma action was stayed pending the decision of this Court on the question of venue, properly noting that where parallel federal litigation has been filed, the court in which the litigation was first filed must decide the question of where the case should be heard.

II. THE ISSUES BEFORE THE COURT

Defendant Blue Stuff, Inc. seeks to have this Court either dismiss the instant lawsuit or transfer the matter to Oklahoma, based on the anticipatory filing exception to the first-filed rule. The Court concludes that Blue Stuffs argument regarding the application of the anticipatory filing exception to the first-filed rule is correct; however, the Court ultimately concludes that transfer to Oklahoma, rather than dismissal, is proper as to the instant suit. The Court shall address the anticipatory filing and transfer issues in turn.

A. The First-Filed Issue

Where the same parties have filed similar litigation in separate federal fora, doctrines of federal comity dictate that the matter should proceed in the court where the action was first filed, and that the later-filed action should be stayed, transferred, or enjoined. Guthy-Renker Fitness, L.L.C. v. Icon Health & Fitness, Inc., 179 F.R.D. 264, 269 (C.D.Cal.1998); 800-Flowers, Inc. v. Intercontinental Florist, Inc., 860 F.Supp. 128, 131-32 (S.D.N.Y.1994); Hop-In Food Stores, Inc. v. S & D Coffee, Inc., 642 F.Supp. 1106, 1107 (W.D.Va.1986); Columbia Plaza Corp. v. Security Nat'l Bank, 525 F.2d 620, 626 (D.C.Cir.1975) (stating, "[s]ound judicial administration counsels against separate proceedings, and the wasteful expenditure of energy and money incidental to separate litigation of identical issues should be avoided"). The decision to invoke the first-filed rule is an equitable determination that is made on a case-by-case, discretionary basis. Plating Resources, Inc. v. UTI Corp., 47 F.Supp.2d 899, 903 (N.D.Ohio 1999); Guthy-Renker Fitness, L.L.C, 179 F.R.D. at 270.

The determination of whether to apply the first-filed rule is not entirely ungoverned, however; courts have recognized three factors to be considered in determining whether to apply the first-filed rule: 1) the chronology of the filings, 2) the similarity of the parties involved, and 3) the similarity of the issues at stake. E.g., Plating Resources, 47 F.Supp.2d at 903. Furthermore, even if a court finds the first-filed rule applicable, it may still make the discretionary determination that the rule should be ignored as a result of "special circumstances," such as forum shopping, anticipatory filing, or bad faith filing. Id. at 905; 800-Flowers, 860 F.Supp. at 132; Hop-In Food Stores, 642 F.Supp. at 1107. If a court determines that the suit first filed with it should be disregarded in favor of the later-filed suit, the court may stay its proceedings, dismiss the case entirely, or transfer the case to its sister court. Big Baby Co. v. Schecter, 812 F.Supp. 442, 443 (S.D.N.Y.1993).

Blue Stuff, Inc's Motion to Dismiss essentially acknowledges the applicability of the first-filed rule to the instant matter. Rather than attacking the applicability of the first-filed rule, Blue Stuff, Inc. relies on the forum shopping or anticipatory filing exception to the first-filed rule. The basic argument espoused by Blue Stuff, Inc. is that NFI impermissibly and unfairly attempted to manipulate the forum of this lawsuit by filing the instant action, waiting until Blue Stuff Inc. learned of the potentially infringing products and filed suit, then serving the North Carolina action on Blue Stuff, Inc. the day after NFI was served with the Oklahoma action. Blue Stuff, Inc., as well as several courts, refers to this course of action as maintaining a "hip pocket" filing that may be pulled out in case a dispute subsequently results in litigation. Blue Stuff, Inc. also argues that the heart of the dispute between the two parties was not even addressed, much less alleged, by NFI in the initial complaint. It argues that NFI has simply attempted to correct its anticipatory filing by way of amended complaint.

In response, NFI argues that it served the North Carolina action on Blue Stuff, Inc. well within the 120 day service limit required by Federal Rule of Civil Procedure 4(m), and that its false advertising claims are independently meritorious, even absent the trademark dispute in this case. It also argues that because the instant action is a suit for damages, rather than a declaratory judgment action, and that this Court therefore does not have any discretion in determining whether to hear this action.

Applying the factors to be considered— chronology, similarity of parties, and similarity of issues—the Court concludes that the first filed rule applies to this case. The North Carolina action was filed well before the Oklahoma action. Blue Stuff, Inc. and NFI are the only parties involved in either action. Furthermore, it is readily apparent to the Court that both the North Carolina and Oklahoma actions will require the resolution of the same trademark, false advertising, and state deceptive trade practices issues.

Having concluded that the first-filed rule applies to this case, the Court now turns to the question of whether this action constitutes forum shopping or anticipatory filing such that the Court should ignore the rule. As a preliminary matter, the Court rejects NFI's argument that the Court lacks discretion in this matter because it has filed a suit for damages which this Court must hear. It is well-settled law that a court has broad discretion in applying and construing the first-filed rule. Plating Resources, Inc. v. UTI Corp., 47 F.Supp.2d at 903; Guthy-Renker Fitness, L.L.C., 179 F.R.D. at 270. As a result, this Court has the discretionary and equitable power to determine whether it should hear this lawsuit or whether the lawsuit is more properly before the Oklahoma district court.

After a very thorough examination and consideration of the law and the circumstances of this case, the Court concludes that the anticipatory filing exception applies to the North Carolina action. The instant case is somewhat atypical in that disputes regarding the first-filed rule generally involve some settlement negotiations between the parties, whereupon one of the parties files a lawsuit without serving the other party, all the while continuing negotiations. See, e.g., Guthy-Renker Fitness, L.L.C., 179...