Transcanada Power Marketing v. Narragansett Elec.

• Decision Date: 18 November 2005
• Docket Number: Civil Action No. 05-40076-FDS.
• Citation: 402 F.Supp.2d 343
• Parties: TRANSCANADA POWER MARKETING, LTD., Plaintiff, v. The NARRAGANSETT ELECTRIC COMPANY, Defendant.
• Court: U.S. District Court — District of Massachusetts

402 F.Supp.2d 343

TRANSCANADA POWER MARKETING, LTD., Plaintiff, v. The NARRAGANSETT ELECTRIC COMPANY, Defendant.

Civil Action No. 05-40076-FDS.

United States District Court, D. Massachusetts.

November 18, 2005.

COPYRIGHT MATERIAL OMITTED

Daniel C. Winston, Wendy S. Plotkin, Choate, Hall & Stewart, Boston, MA, for Plaintiff.

Vincent F. O'Rourke, Jr., Kimberly A. Stone, Bowditch & Dewey LLP, Worcester, MA, for Defendant.

MEMORANDUM AND ORDER ON PLAINTIFF'S MOTION TO ENJOIN PROSECUTION AND DEFENDANT'S MOTION TO TRANSFER VENUE AND TO STAY

SAYLOR, District Judge.

This is a contract dispute between a marketer of wholesale electric power based in Massachusetts and a retail distributor of electric power based in Rhode Island. The subject matter of the lawsuit is whether the retailer should be required to pay a fuel adjustment factor under the contract as part of the price of the electricity. The resolution of that issue is likely to affect the electric bills of a substantial number of electric ratepayers in Rhode Island.

The present motions involve the forum in which the lawsuit is to be litigated. Plaintiff TransCanada Power Marketing, Ltd. ("TransCanada") filed this suit in the District of Massachusetts on May 17, 2005. Defendant The Narragansett Electric Co. ("Narragansett") filed a similar suit in the District of Rhode Island on May 26, 2005. The two lawsuits are conceded to be essentially identical, and it is obvious that only one of them should proceed. For the reasons set forth below, this Court concludes that the matter should proceed in the District of Massachusetts.

I. Background¹

Narragansett is the largest electric distribution company in Rhode Island, providing electricity to approximately 480,000 Rhode Island customers.² Narragansett purchases electricity for its customer base from TransCanada, a power distribution company, pursuant to the terms and conditions of their Wholesale Standard Offer Service Agreement ("WSOS Agreement"). At the heart of this dispute is a provision in the WSOS Agreement stating that the price TransCanada will receive for its electricity includes (1) the standard offer wholesale price; and (2) a fuel adjustment factor ("FAF"), to be approved by the Rhode Island Public Utilities Commission. The parties' differing contractual interpretations focus on whether, beginning in January 2005, Narragansett should still be required to pay the fuel adjustment factor as part of the price for electricity.

At some point in early 2005, the parties entered into settlement negotiations. The negotiations proceeded along two tracks: the parties negotiated towards a settlement of the substantive dispute, and they also negotiated towards an arbitration agreement to resolve whatever aspects of the dispute they could not settle themselves. During the negotiations, Narragansett paid the monthly FAF under protest, reserving its rights to dispute those charges. It apparently continues to make those payments. In an April 25 meeting between the parties and Rhode Island regulators, Narragansett offered proposed settlement terms. After the meeting, TransCanada indicated to Narragansett its willingness to hold off on negotiating the arbitration agreement for a short time while settlement negotiations proceeded. By April 29, the parties had agreed to a settlement along the lines of the April 25 proposal, with some modifications. They intended to submit this agreement to regulators for approval. Before they did so, however, the Division of Public Utilities and Carriers (the "Division"), a regulatory body within the Rhode Island Public Utilities Commission, informed the parties that its April 25 agreement was insufficient and proposed what TransCanada viewed as significant changes. According to TransCanada executive Michael Hachey, the Division indicated in a May 3 telephone conversation that its proposals were essentially requirements. The parties communicated a few more times regarding the status of the negotiations.³

Before reaching a resolution, however, TransCanada filed this lawsuit on May 17, 2005. After filing an answer and counterclaim in this action, Narragansett filed a separate lawsuit against TransCanada on May 26, 2005, in the District of Rhode Island. See The Narragansett Electric Co. v. TransCanada Power Marketing, Ltd., Civil Action No. 05-234S (D.R.I.).⁴ On June 16, 2005, TransCanada filed in the Rhode Island action a Motion to Dismiss, or in the Alternative, to Stay or Transfer Venue to the District of Massachusetts.⁵ Before the Rhode Island court had ruled on that motion, TransCanada filed in this action a Motion to Enjoin Narragansett from prosecuting this case in Rhode Island.

On October 5, 2005, Judge Smith of the District of Rhode Island issued a decision and order providing that the Rhode Island action should be stayed, pending a decision by this Court as to whether the matter should proceed in Massachusetts or Rhode Island.

II. Analysis

The resolution of this dispute turns on the application of the "first-filed" rule, which generally gives precedence to the first of two duplicative actions proceeding in different federal courts. "Where identical actions are proceeding concurrently in two federal courts, entailing duplicative litigation and a waste of judicial resources, the first filed action is generally preferred in a choice-of-venue decision." Cianbro Corp. v. Curran-Lavoie, Inc., 814 F.2d 7, 11 (1st Cir.1987); see Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 91 L.Ed. 1055 (1947) (the "plaintiff's choice of forum should rarely be disturbed").

There are at least two exceptions to the first-filed rule. The first is where there are "special circumstances" justifying a transfer, such as where the party bringing the first-filed action engaged in misleading conduct in order to prevail in a pre-emptive "race to the courthouse." The second is where the balance of convenience substantially favors the second-filed action. See Feinstein v. Brown, 304 F.Supp.2d 279, 283 (D.R.I.2004); Holmes Group, Inc. v. Hamilton Beach/Proctor Silex, 249 F.Supp.2d 12, 16 (D.Mass.2002); Veryfine Products, Inc. v. Phlo Corp., 124 F.Supp.2d 16, 22-25 (D.Mass.2000).

There is no dispute here that the Massachusetts action was filed nine days before the Rhode Island action. The Court will therefore consider whether the Rhode Island action should be given priority based on either of the two exceptions to the general rule.

A. Special Circumstances

The first-filed presumption may be overcome when "special circumstances" are present. See, e.g., Holmes Group, 249 F.Supp.2d at 16; Nortek, Inc. v. Molnar, 36 F.Supp.2d 63, 69-70 (D.R.I.1999). Special circumstances have been found to exist "where a party has won the race to the courthouse by misleading his opponent into staying his hand in anticipation of negotiation[,] or by reacting to notice of imminent filing by literally sprinting to the courthouse the same day." Veryfine, 124 F.Supp.2d at 22; see also Holmes Group, 249 F.Supp.2d at 16. Some courts have framed the issue, at least in part, in terms of a public policy favoring the promotion of settlements. See Nortek, 36 F.Supp.2d at 70 ("Where this Court has discretion, it will not reward conduct that undermines the sound policy of promoting settlements and negotiations outside the courthouse."); see also Davox Corp. v. Digital Systems Int'l, Inc., 846 F.Supp. 144, 148 (D.Mass.1993).

As an initial matter, this case does not present a literal "race to the courthouse." Narragansett has provided no evidence that it ever intended to sue TransCanada before TransCanada commenced this action; for example, it never gave a notice of default alleging breach of contract.⁶ As the Fourth Circuit aptly noted, "there can be no race to the courthouse when only one party is running." Learning Network, Inc. v. Discovery Communications, Inc., 11 Fed.App'x 297, 301, 2001 WL 627618 (4th Cir.2001).

Nor, for that matter, does this case present an instance of blatantly improper forum-shopping. Either of the two parties could have legitimately initiated a claim in either of the two forums. TransCanada can hardly be faulted for filing in Massachusetts; that is the state where it does business, and the dispute involves a contract that was negotiated primarily in Massachusetts, signed in Massachusetts, and governed expressly by Massachusetts law. See, e.g., Holmes Group, 249 F.Supp.2d at 17 ("Where a plaintiff chooses his home forum, such a choice usually represents considerations of convenience.").⁷

Whether this case presents "special circumstances" therefore turns on whether TransCanada engaged in improper or misleading conduct. Narragansett contends that TransCanada "lured [it] into a false sense of security by engaging in" settlement negotiations and then "rac[ed] to the courthouse steps." Narragansett points to no affirmative misrepresentations by TransCanada, nor does it contend TransCanada negotiated in bad faith simply to buy time in order to secure a more favorable forum.⁸ Instead, it asks the Court to ignore the first-filed rule because Narragansett "reasonably [held] off from filing suit" based on its belief that the parties were still negotiating a potential settlement.

In other words, Narragansett asks the Court to find an exception to the first-filed rule based on the "the sound policy of promoting settlements and negotiations outside the courthouse." Nortek, 36 F.Supp.2d at 70. The implication, of course, is that by declining jurisdiction and transferring this case to Rhode Island, this Court would promote out-of-court settlements and discourage improper forum-shopping. On the facts of this case, however, precisely the opposite is true; such a result would create an incentive for aggrieved parties to sue first and negotiate later.

TransCanada contends that the alleged breach occurred in early 2005. At that point, it had at least three choices: it could file suit in Massachusetts, file suit in...