[them] to obtain coverage under the policies." Id., Exh. B at
On November 27, 1990 Wausau denied coverage on the grounds that
Prudential and PRUPAC failed to establish that an "occurrence"
took place within the period of coverage or that there was any
"Personal Injury," "Property Damage" or "Advertising Injury"
under the policies. Pollack Aff., Exh. A. On November 30, 1990
Prudential and PRUPAC responded with a letter stating they
hoped to avoid litigation and stating Prudential's belief that
Wausau's denial of coverage was not in good faith and exposed
Wausau to liability. Pollack Aff., Exh. B at 7.
On December 12, 1990 Prudential sent Wausau a second letter
stating that the Eastman action had been settled for $3 million
on November 30, 1990. Prudential further noted that its
attorneys' fees to date totalled approximately $1 million. Katz
Aff., Exh. C.
On December 13, 1990 Wausau commenced this action in New York
Supreme Court seeking a declaratory judgment that it is not
obligated to indemnify Prudential or PRUPAC for the Eastman
claim and that Prudential and PRUPAC breached their fiduciary
and contractual duties by failing to provide timely notice to
Wausau and are estopped from asserting any claim under the
policies. Prudential and PRUPAC claim that they had intended to
arrange a settlement meeting between the parties' presidents
prior to filing their own complaint. Katz Aff. ¶ 22. Jon Bohr,
a senior claims supervisor for Wausau, denies that any
settlement negotiations were being conducted when Wausau filed
this action. Bohr Aff. ¶ 13. On December 14, 1990, Prudential
and PRUPAC filed a separate action against Wausau in United
States District Court for the District of New Jersey for
declaratory relief and alleging breach of contract and breach
of the covenant of good faith and fair dealing.
Wausau argues that the parties' dispute should be litigated in
a New York forum because the umbrella policies were negotiated
through the New York City office of Prudential's broker, New
Amsterdam Excess, Inc. ("New Amsterdam"), Ellebracht Aff. ¶ 4,
because the policies were executed and delivered in New York,
id. ¶ 9, because Prudential paid its premiums through New
Amsterdam, which assisted in collection of late premiums from
time to time, id. ¶ 10 & Exh. I, and because Wausau obtained
information necessary for its audit of the Prudential policies
from New Amsterdam in New York. Id. ¶ 12. Prudential does not
dispute these allegations. Instead, it argues that Prudential
is entitled to a New Jersey forum because the primary liability
policies were negotiated, executed and delivered in New Jersey,
because Prudential negotiated with Wausau over coverage of the
Eastman claim in New Jersey and because most of the witnesses
with knowledge of the umbrella policies and of the Eastman
claim are located in New Jersey. Katz Aff. ¶¶ 5, 7 & 12.
The long-standing rule in this circuit is that "[w]here there
are two competing lawsuits, the first suit should have
priority, absent the showing of balance of convenience . . . or
. . . special circumstances giving priority to the second."
First City Nat'l Bank & Trust Co. v. Simmons, 878 F.2d 76, 79
(2d Cir. 1989) (citations omitted).
The type of "special circumstances" which give priority to a
later-filed action are illustrated by Factors Etc., Inc. v.
Pro Arts, Inc., 579 F.2d 215 (2d Cir. 1978), cert. denied,
440 U.S. 908, 99 S.Ct. 1215, 59 L.Ed.2d 455 (1979). In that
case, Pro Arts received a cease and desist letter from Factors
threatening suit and responded by filing a declaratory judgment
action in Ohio. Five days later, Factors filed in New York. The
New York court held that when a declaratory judgment action is
triggered by receipt of a notice letter, this equitable
consideration may be a factor in allowing the second-filed suit
to proceed in the plaintiff's chosen forum. Id. at 219. The
court cited Justice Brennan's statement in Perez v. Ledesma,
401 U.S. 82, 119 n. 12, 91 S.Ct. 674, 694 n. 12, 27 L.Ed.2d 701
(1971) (Brennan, J., dissenting), that "[t]he federal
judgment is not a prize to the winner of a race to the
The cases cited by Prudential in an effort to show that this
action presents similar "special circumstances" are
distinguishable. Unlike in the Factors case, Wausau had not
received notice of suit prior to filing this action in state
court. Prudential's November 30 letter, in which it stated that
it "hoped to avoid litigation," was at best an attempt to
initiate settlement negotiations and cannot reasonably be
construed as a notice of suit. Nor can Prudential's prior
letter of November 21, 1990, written before the Eastman action
was settled, be deemed a notice of suit. It merely states that
Prudential intended to pursue all available remedies to obtain
coverage without explicitly mentioning a lawsuit, a tentative
filing date or a forum. Communications deemed to constitute
notice of suit generally contain at least one of those
elements. Otherwise, subsequent litigation commenced by the
recipient would not reasonably suggest there had been a race to
the courthouse. See, e.g., Gibbs & Hill, Inc. v. Harbert
Int'l, Inc., 745 F. Supp. 993, 996 (S.D.N.Y. 1990) (declaratory
judgment action filed after receipt of formal notice of default
containing deadline); Great Am. Ins. Co. v. Houston Gen. Ins.
Co., 735 F. Supp. 581 (S.D.N.Y. 1990) (declaratory judgment
action filed after receipt of notice of suit containing
deadline)*fn2; Equipos Nucleares, S.A. v. Fairfield Energy
Venture, L.P., No. 88 Civ. 7543, 1989 WL 6628 (S.D. N.Y. Jan.
23, 1989) (suit filed one day after plaintiff was notified of
defendant's imminent filing of interpleader action in Maine);
Philipp Bros., Inc. v. Schoen, 661 F. Supp. 39, 43 (S.D.N.Y.
1987) (suit filed "immediately after [plaintiff] was informed
of defendant's intention to bring the California action");
Columbia Pictures Indus., Inc. v. Schneider, 435 F. Supp. 742,
747 (S.D.N. Y. 1977) (declaratory judgment action filed after
plaintiff received defendant's own draft complaint), aff'd,
573 F.2d 1288 (2d Cir. 1978).
Another type of "special circumstances" negating the
first-to-file rule involves parties engaged in settlement
negotiations. In Don King Prod., Inc. v. Douglas, 735 F. Supp. 522
(S.D.N.Y. 1990), the court found special circumstances
favoring the second-filed action where plaintiff, who had
promised its adversary an answer to a settlement offer, filed
suit instead. On this record, however, the Court cannot
conclude that the parties were in the midst of settlement
negotiations when this action was commenced. After Wausau
denied coverage, minimal correspondence was exchanged and no
meetings were scheduled. Prudential cannot rely on the fact
that it intended to arrange a meeting between the presidents of
both companies where it took no steps to do so.
In sum, Prudential has made no showing of "special
circumstances" which would warrant a departure from the
first-to-file rule. See First City Nat'l Bank & Trust Co. v.
Simmons, 878 F.2d at 79.*fn3 Accordingly, Prudential's
motion to dismiss is denied.
The factors governing transfer under 28 U.S.C. § 1404(a) lead
to a conclusion that this action properly lies in this
district. The burden is on the moving party to establish that
there should be a change of forum. See Factors Etc., 579 F.2d
at 218. Prudential urges the Court to transfer this action to
New Jersey because defendants' operations and records are
located there. Prudential ignores the remaining
factors under § 1404(a) which include:
the place where the operative facts occurred; the convenience
of the parties; the convenience of the witnesses; the relative
ease of access to the sources of proof and the availability of
process to compel attendance of unwilling witnesses; the
plaintiff's choice of forum; a forum's familiarity with
governing law; trial efficiency; and the interests of justice.
Don King Prod., 735 F. Supp. at 533. The Court is persuaded,
on the grounds that the umbrella policies were negotiated and
paid in New York through a New York broker, that Prudential has
failed to meet its burden of showing that transfer is clearly
warranted. Accordingly, Prudential's motion to transfer or stay
this action is denied.
All counsel are to attend a pretrial conference on Thursday,
May 16, 1991 at 9:00 a.m. in courtroom 302.
IT IS SO ORDERED.