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COMPUTER ASSOCS. INTL. v. ELECTRONIC DATA SYS. COR

March 26, 1993

COMPUTER ASSOCIATES INTERNATIONAL, INC., ON-LINE SOFTWARE INTERNATIONAL, INC., and PANSOPHIC SYSTEMS, INC., Plaintiffs,
v.
ELECTRONIC DATA SYSTEMS CORPORATION, Defendant.



The opinion of the court was delivered by: I. LEO GLASSER

 GLASSER, United States District Judge:

 On October 9, 1992, Computer Associates International ("CA") filed the complaint in this declaratory judgment action in Suffolk County Supreme Court. Defendant Electronic Data Systems Corporation ("EDS") removed the action to federal court on January 29, 1993. EDS now moves this court to dismiss, stay, or transfer the action based on the fact that a related action between the same parties has been pending in the Northern District of Texas for over a year and is scheduled for trial in November of 1993. For the reasons set forth below, this court hereby grants EDS's motion to dismiss.

 FACTS

 CA is a leading independent software development company and the dominant supplier of systems, applications, and graphics software for IBM and IBM-compatible mainframe computers. A corporation organized and existing under the laws of the state of Delaware with its principal place of business in Long Island, New York, CA is involved in developing, acquiring, marketing, and servicing over 200 computer software products primarily for use on mainframe and mini-computers.

 On-Line Software International ("On-Line"), a wholly-owned subsidiary of CA since September 26, 1991, is a Delaware corporation originally headquartered in Fort Lee, New Jersey. Pansophic Systems, Inc. ("Pansophic"), a wholly-owned subsidiary of CA since October 31, 1991, is an Illinois corporation originally headquartered in Lisle, Illinois. Prior to acquisition by CA both Pansophic and On-Line were independent designers, developers, and marketers of computer software that licensed the right to use certain of its computer software to third parties, including EDS. More specifically EDS and Pansophic entered into a Master Software License Agreement (the "Pansophic Agreement") in September of 1989, and EDS and On-Line entered into a similar Master Agreement (the "On-Line Agreement") in September of 1990. This lawsuit seeks a declaration of rights and obligations under these Agreements.

 CA and EDS (and their subsidiaries) have been involved in various software license agreements from as early as October 1, 1983. On January 9, 1992, EDS filed an action against CA in the United States District Court for the Northern District of Texas alleging numerous state and federal claims, including breach of contract, interference with business relations, breach of the duty of good faith and fair dealing, antitrust violations and copyright misuse. (Affidavit of Ira G. Greenberg P 2 and Exh. A) The heart of the Texas action is EDS's allegation that CA "has systematically acquired software companies . . . with large market shares in software products that cannot be easily replaced [and,] as a result, CA possesses powerful leverage over its customers (including EDS), which it applies by demanding excessive payments . . . ." (Memorandum of Law in Support of Motion to Dismiss or Stay, at 3-4; Reply Memorandum at 4) EDS alleges that CA's deliberate pursuit and exploitation of its monopoly power has caused CA to breach numerous software license agreements. *fn1"

 
120. In addition to the above [specifically mentioned] agreements, EDS is a party or successor-in-interest to numerous other agreements to which CA is a party or successor-in-interest.
 
121. Upon information and belief, EDS has breached most, if not all of those agreements . . . .

 (Greenberg Aff. Exh. B) In other words, CA acknowledged the Texas action's expansive scope and revealed its understanding that all the agreements between the parties were likely to be the action's subject. Nevertheless, neither the complaint nor the answer expressly raised the issue of enforceability of the Pansophic or On-Line Agreements. While the original complaint discussed license agreements with numerous subsidiaries of CA, it did not mention Pansophic or On-Line specifically; it did refer to CA's "illegal acquisition" of Pansophic. Of course, reference to the dates of acquisition of On-Line and Pansophic reveals that at the time EDS filed its complaint, CA had owned these companies for only a few months. *fn2"

 On October 6, 1992, EDS moved for leave to file a supplemental complaint in the Texas action and attached the proposed First Supplemental Complaint to its motion. (Greenberg Aff. P 5 & Exh. E; Miller Aff. P 32) Texas has a local rule mandating a twenty-day response period to such a motion. The District Court for the Northern District of Texas granted EDS's motion on October 27, 1992, and EDS filed its First Supplemental Complaint on October 28, 1992. (Greenberg Aff. P 5 & Exhs. F & G) That complaint sets forth transactions that allegedly have occurred since EDS filed its original complaint, including violations of the On-Line and Pansophic Agreements. CA moved to dismiss the First Supplemental Complaint on November 17, 1992, and the Texas court has not yet decided that motion. EDS filed a Second Supplemental Complaint on November 25, 1992, in which it asserted claims against CA for breach of various subcontracts CA had entered into in connection with an EDS government contract with the Department of the Navy.

 As mentioned above, CA filed the action now before this court on October 9, 1992. Notably, this action, which seeks a declaratory judgment construing the On-Line and Pansophic Master Software License Agreements, was filed against EDS and GM in Suffolk County Supreme Court three days after EDS moved to supplement its complaint in the Texas federal court. *fn3" ...


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