Peregrine Corp. v. Peregrine Industries, Inc., Civ. A. No. 91-2557.

• Decision Date: 24 June 1991
• Docket Number: Civ. A. No. 91-2557.
• Citation: 769 F. Supp. 169
• Parties: The PEREGRINE CORPORATION v. PEREGRINE INDUSTRIES, INC. and Richard A. Voit.
• Court: U.S. District Court — Eastern District of Pennsylvania

769 F. Supp. 169

The PEREGRINE CORPORATION v. PEREGRINE INDUSTRIES, INC. and Richard A. Voit.

Civ. A. No. 91-2557.

United States District Court, E.D. Pennsylvania.

June 24, 1991.

Joseph W. Swain, Jr., Montgomery, McCracken, Walker, & Rhoads, Philadelphia, Pa. and Robert D. Katz, Cooper and Dunham, New York City, for plaintiff.

Kit M. Stetina, Robert D. Buyan, Bruce B. Brunda, Stetina and Brunda, Laguna Hills, Cal., and Roberta Jacobs-Meadway, Panitch Schwarze Jacobs & Nadel, Philadelphia, Pa., for defendants.

MEMORANDUM AND ORDER

HUYETT, District Judge.

This is an action for trademark infringement and unfair competition. The same parties and the same issues are the subject of an earlier filed lawsuit in the Central District of California entitled Peregrine Industries, Inc. v. The Peregrine Corporation, Civil Action No. SA CV 91-21 GLT (RNRX). Plaintiff The Peregrine Corporation filed a motion to enjoin defendants Peregrine Industries, Inc. and Richard A. Voit from prosecuting the California action. In response, defendants filed a cross-motion to stay, dismiss, or transfer to the Central District of California.

On Tuesday, June 18, 1991, oral argument was heard on these motions. After the completion of oral argument, I granted defendants' motion to stay, dismiss, or transfer to the Central District of California and denied plaintiff's motion to enjoin prosecution of the California action. I write now to explain my reasons.

I.

Plaintiff The Peregrine Corporation ("TPC") was incorporated under the laws of New Jersey on December 31, 1985. Plaintiff is in the business of providing training and consulting services in the use of firearms to police departments, security agencies, and members of the general public throughout the United States under the trade name "The Peregrine Corporation" and has continually used its service mark and trademark "Peregrine", as well as its "Peregrine Falcon" logo. Presently, plaintiff's principal place of business is Mertztown, Pennsylvania.

Defendant Peregrine Industries, Inc. ("PII") is a California corporation which maintains its only corporate office and only physical plant in Huntington Beach, California. Defendant PII adopted the tradename "Peregrine Industries, Inc." in 1989 and, since that time, has been involved in presale engineering and development of a semi-automatic handgun product to be marketed under the trademark "Falcon." A limited introductory collectors edition of the handgun is to be designated the "Phoenix." Defendant Richard Voit is the President of PII.

PII has not yet sold a single product and has engaged in only limited presale promotional activities. In September of 1990, PII sent out a two-page press release announcing that it was a new firearms manufacturer. In March of 1991, PII mailed an introductory letter to specially selected gun enthusiasts to whom PII wished to extend offers to place reservations for subsequent purchases of a limited collectors edition of the Falcon pistol, designated the "Phoenix pistol." Later in March of 1991, an introductory product catalog for PII's Falcon 10mm semi-automatic handgun appeared in the March 1991 edition of American Firearms Industry, a trade publication which is circulated to firearms manufacturers and retailers throughout the United States. Both of the promotional pieces in March of 1991 were circulated throughout the United States.

Plaintiff, through its Chicago counsel, first notified PII of its alleged claim of common law trademark infringement in a letter to PII dated July 5, 1990. The management of PII referred the letter to its counsel who thereafter engaged in communications with plaintiff and its counsel in an effort to understand the factual basis for plaintiff's claims and in an attempt to amicably resolve the matter.

In early January 1991, after six months of fruitless settlement negotiations, plaintiff's Chicago counsel sent another letter to PII threatening immediate litigation. At that point and after determining that plaintiff was properly subject to jurisdiction and venue in the Central District of California, PII filed a complaint for declaratory judgment against plaintiff on January 15, 1991.

During an April 18, 1991, telephone conversation with plaintiff's New York counsel, it became apparent to PII's counsel that litigation remained imminent and that a reasonable settlement was unlikely. Therefore, on the afternoon of Thursday, April 18, 1991, PII's counsel transmitted to plaintiff's New York counsel by facsimile a letter informing plaintiff that PII had previously filed the California complaint which would be served upon plaintiff. That letter further inquired as to whether plaintiff's New York counsel was authorized to accept service of process on behalf of his client.

On April 19, 1991, the day after receiving a copy of the letter dated April 18, 1991, plaintiff's New York counsel filed the complaint in this action in the United States District Court for the Eastern District of Pennsylvania. After the Pennsylvania complaint was filed, it was quickly dispatched along with a summons to a California process server for immediate service upon PII. On Tuesday, April 23, 1991, the Pennsylvania complaint and summons were served upon Mr. Voit.

Also on Tuesday, April 23, 1991, plaintiff's New York counsel responded to PII's letter dated April 18, 1991, informing PII's counsel that he was not authorized to accept service of process. On Wednesday, April 24, 1991, the complaint and summons in the California action were served upon plaintiff at its principal place of business. In addition, on April 23, 1991, PII mailed a duplicate service of process to plaintiff's statutory agent for service by United States Postal Service Express Mail.

II.

In its motion to stay, dismiss, or transfer to the Central District of California, defendants contend that, because its action was the first to be filed, this court should refrain from assuming jurisdiction over the action and should permit the litigation to proceed in the California action. Plaintiff, on the other hand, contends that this action should proceed and that the California action should be enjoined because defendants in this action were served before the defendant in the California action. In addition, plaintiff argues that, at the time the complaint for declaratory judgment was filed in California, there was no justiciable controversy and, thus, that the complaint was prematurely filed.

The United States Supreme Court first established what has come to be known as the "first-filed rule" in Smith v. McIver, 22 U.S. (9 Wheat) 532, 6 L.Ed. 152 (1824), in which the Court stated:

In all cases of concurrent jurisdiction, the court which first has possession of the subject must decide it.

Id. at 535. Then in 1941, the Third Circuit Court of Appeals in Crosley Corp. v. Hazeltine Corp., 122 F.2d 925 (3d Cir.1941), borrowed this quote and clarified the rule by speaking explicitly to federal concurrent jurisdiction. In Crosley, the court stated:

It was long ago laid down by Chief Justice Marshall as a salutary rule that "In all cases of concurrent jurisdiction, the court which first has possession of the subject must decide it." It is of obvious importance to all litigants to have a single determination of their controversy, rather than several decisions which if they conflict may require separate appeals to different circuit courts of appeals. No party has a vested right to have his cause tried by one judge rather than by another of equal jurisdiction.... The party who first brings a controversy into a court of competent jurisdiction for adjudication should, as far as our dual system permits, be free from the vexation of subsequent litigation over the same subject matter. The economic waste involved in duplicating litigation is obvious. Equally important is its adverse effect upon the prompt and efficient administration of justice. In view of the constant increase in judicial business in the federal courts and the continual necessity of adding to the number of judges, at the expense of the taxpayers, public policy requires us to seek actively to avoid the waste of judicial time and energy.

Id. at 929-30 (citations omitted).

Prior to the decision in EEOC v. University of Pennsylvania, 850 F.2d 969 (3d Cir.1988), the Third Circuit Court of Appeals had never specifically referred to the rule as the "first-filed rule." Instead, the Third Circuit had referred to the rule in terms of which court "first had possession of the subject" and the court "first obtaining jurisdiction of the parties and the issues." As a result, in National Patent Development Corp. v. American Hospital Supply Corp., 616 F.Supp. 114 (S.D.N.Y.1984), the court noted that, in the Third Circuit, it appeared that jurisdiction over the person rather than the filing of the complaint was controlling for purposes of determining the priority of two lawsuits involving the same parties and the same issues. Id. at 118 n. 7.

However, in EEOC v. University of Pennsylvania, the Third Circuit Court of Appeals for the first time specifically referred to the rule as the "first-filed rule." The issue before the court in EEOC was whether the district judge abused his discretion by refusing to dismiss the second-filed suit in favor of the first-filed suit. In determining which was the first-filed suit, the court looked only to the dates that the complaints in the two lawsuits were filed. In fact, the court never even mentioned the dates of service of process. Although the court decided that the district judge did not abuse his discretion in refusing to dismiss the second-filed suit, the court emphasized:

Invocation of the rule will usually be the norm, not the exception. Courts must be presented with exceptional circumstances before exercising their discretion to depart from the first-filed rule.

Id. at 979.

Although the Third Circuit Court of Appeals has never specifically addressed...