theory, the claims are not supplemental but are entirely different.
While it is true that the issues of ownership and infringement are unrelated in terms of the legal issues and matters of proof, they are yet inextricably intertwined in that proof of one is necessary for action on the other. See Refac Int'l Ltd. v. Mastercard Int'l, 758 F. Supp. 152, 155 (S.D.N.Y. 1991) ("Status as an assignee or patentee is a crucial prerequisite to bringing suit on infringement."). Thus, it would not be improper for this court to exercise its jurisdiction over these defendants; however, this jurisdiction is a doctrine of discretion and although rare, to decline such discretion is not out of the question.
NSC and FSC argue that even if this court finds supplemental jurisdiction, it should abstain from exercising it by staying those claims until the California action is resolved. Refusal of a federal court to exercise its jurisdiction by either dismissing the claims or staying the action in favor of another court is a rare occurrence and is only done in limited circumstances that "would clearly serve an important countervailing interest." County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 189, 3 L. Ed. 2d 1163, 79 S. Ct. 1060 (1959). Such action by a federal court is only available in limited, narrowly circumscribed instances.
Abstention is appropriate where a federal constitutional issue might be avoided by a state court decision, Id.; Railroad Comm'n of Texas v. Pullman Co., 312 U.S. 496, 85 L. Ed. 971, 61 S. Ct. 643 (1941); where difficult questions of state law are presented that would have substantial impact on important public policy, Louisiana Power & Light Co. v. City of Thibodaux. 360 U.S. 25, 3 L. Ed. 2d 1058, 79 S. Ct. 1070 (1959); or where federal jurisdiction has been invoked to restrain state criminal proceedings. Younger v. Harris, 401 U.S. 37, 27 L. Ed. 2d 669, 91 S. Ct. 746 (1971). This case does not fall into any of these categories; however, "in exceptional circumstances, there are other compelling reasons for declining jurisdiction." 28 U.S.C. 1367(c)(4). Present in such cases are "considerations of 'wise judicial administration giving regard to conservation of judicial resources and comprehensive disposition of litigation." Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 47 L. Ed. 2d 483, 96 S. Ct. 1236 (1976) (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180, 183, 96 L. Ed. 200, 72 S. Ct. 219 (1952)). In Colorado River, the Supreme Court set forth particular circumstances which may weigh in favor of a stay each of which "is to be applied in a pragmatic, flexible manner with a view to the realities of the case at hand." Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983) (adding two additional factors to those Put forth in Colorado River).9
1. Order of Jurisdiction
If a court has already devoted considerable time, energy, and resources to understanding the issues, it is usually the best course to allow that court to proceed with the litigation rather than allow a different court to step in and reduplicate the efforts. Typically, this factor is determined in a rather straightforward manner by looking at the work expended by each court on the matters before it and the progress made in each action.
In this litigation, the federal courts obtained jurisdiction over the entire litigation long before the California court; the initial lawsuit was filed in federal court in Virginia on September 12, 1991 whereas the state action began on February 16, 1992. However, the ownership portion of the federal litigation was begun only after the infringing defendants in the federal action moved to stay this action because the state action had begun. Loral argues that the fact that the federal litigation was begun first is significant and that extensive discovery on the ownership issue has been undertaken, this court should retain jurisdiction. NSC and FSC contend that what is critical is the ownership phase of the litigation which was first obtained by the state court. The ownership defendants argue that the discovery undertaken at the federal level has little bearing on the ownership dispute and that the state court is at the same stage or further along than the federal court.
They argue that this factor weighs in their favor or is at least neutral. We are inclined to agree.
Although the federal action was filed a year and a half prior to the state action, it is the ownership dispute that is most relevant. As to ownership, it would appear that relatively little has been done in this court that would shed light on the circumstances through which NSC and FSC claim they retained ownership of the patents while discovery has proceeded in the state court. Moreover, when combined with the fact that this court has not obtained jurisdiction over Schlumberger, arguably an indispensable party to the issue of ownership, and that Loral has been actively litigating in the state forum, the order of filing appears to be at minimum, a neutral factor.
2. Convenience of the Forum
Loral contends that New York is by far the more convenient forum in that New York law applies, certain witnesses are available here, and travel is easier to New York. NSC and FSC respond that New York is not convenient to them nor would it be convenient to subject the infringing defendants to the process of discovery that must take place on the ownership issue. This court finds that this factor is neutral as to both parties in that travel has made both New York and San Jose easily accessible by air travel, each party appears to have familiarity with each area, and it has not been shown that all witnesses are in New York as opposed to California. By contrast, this court's hearing of the ownership issue would needlessly mire the infringing defendants in litigation over which they have little to contribute; certainly, these defendants have an enormous stake in the outcome of the ownership issue but it is unnecessary to involve them in the issue. Indeed, if NSC and FSC prevail on their claims, the infringing defendants would no longer be liable to Loral.
3. Protection of the Rights of the Federal Plaintiff
Loral contends that this court will better serve its interests because discovery has already been undertaken and certain procedural devices are available here to speed up matters. NSC and FSC argue that California can adequately protect Loral's rights and they cite Loral's continued use of the California courts as examples of this. Defendants further contend that California has certain procedural devices available that will enable Loral to obtain speedy resolution. Given that Loral has been actively litigating in California
and that California state courts do have procedural devices to speed litigation, this court believes this factor to be neutral.
4. Rule of Decision
When state law will apply to the bulk of the claims this factor will weigh in favor of a federal court abstaining. Here, the infringement claims are governed by federal law but ownership of these patents will be settled by state contract law. It has been stated that New York state law governs the contracts that are central to the determination of the ownership of the patents. Loral contends that this court is in a better position to apply New York state law than a California state court while NSC and FSC posit that state law predominates the ownership issue thus mandating this court's recusal.
It would appear that this factor weighs on the side of staying this action. Simply because this court sits in New York does not mean that it can apply New York state law any better than a California court. Federal courts are obliged to give comity to state courts and not to assume expertise where none may lie. Carnegie-Mellon University v. Cohill, 484 U.S. 343, 350, 98 L. Ed. 2d 720, 108 S. Ct. 614 (1988). We will not say that we are better equipped than California state courts to apply New York state law.
5. Avoidance of Piecemeal Litigation
The Supreme Court has stated that "by far the most important factor in our decision to approve the dismissal [in Colorado River] was the 'clear federal policy . . . [of] avoidance of piecemeal adjudication.'" Moses H. Cone, 460 U.S. at 16. Clearly, the weight given each factor will vary according to the facts of each case considered but the avoidance of piecemeal litigation will be paramount if inconsistent verdicts and wasteful expenditure of judicial resources on duplicative litigation were to otherwise result. The desire to avoid this possibility will require a court to abstain in favor of another. See General Reinsurance Corp. v. Ciba-Geigy Corp., 853 F.2d 78, 81 (2d Cir. 1988); Lumbermens Mut. Casualty Co. v. Connecticut Bank & Trust Co., 806 F.2d 411, 414 (2d Cir. 1986); Arkwright-Boston Mfrs. Mut. v. City of New York, 762 F.2d 205 (1985); Travelers Indem. Co. v. Monsanto Co., 692 F. Supp. 90 (D. Conn. 1988).
Loral presents an unconvincing argument that piecemeal litigation can only be avoided by this court. They point to the fact that this court is the only court that can bind all of the interested parties in this litigation whereas a decision in California cannot bind the infringing defendants. Although this is true, the argument is premised on the rather shaky assumption that this court will be the first to reach judgment on the issue of ownership. Unfortunately, our courts are overwhelmed by litigation and it takes several months for motions to be decided and years for trials to occur. There is no guarantee that Loral would succeed on summary judgment thus enabling it to use this decision as res judicata against NSC and FSC. Indeed, it is easily imaginable that were this court not to abstain, the California court and this court could both proceed to judgment with conflicting resolutions leaving the infringing defendants liable not only to Loral but to NSC and FSC. Certainly, there can be no argument that this is a desired state of affairs.
We cannot enjoin the California state court from proceeding; however, we have the ability to restrain ourselves while the California court resolves the issue so that we may continue with this litigation which is ultimately dependent on a resolution of the ownership issue. This litigation has taken up considerable time and resources of this court; abstention is not granted easily. Yet, in the interest of justice, there can be no other course but to stay this action pending the resolution of the California state action which we hope will be obtained quickly. The proof and questions of law of the infringement and ownership issues differ greatly; ownership of these patents is governed by state contract law whereas infringement is governed by federal law; the infringing defendants have little to contribute to the ownership issue and will merely waste their time by being involved.
Dismissal of this case would be inappropriate as the California court does not have all of the interested parties in this patent litigation before it. Indeed, it is only deciding the limited question of who owns these patents. If the California court decides that Loral owns the patents, then this suit should go forward as it is more than prepared to do; however, if the patents are deemed to be owned by NSC or FSC, then it would be appropriate to dismiss this litigation at that time but not before. Loral has presented a compelling argument that it indeed owns these patents, this court cannot say that the issue is cut and dried and therefore dismiss this litigation. Instead, we will await the outcome of the California litigation and proceed accordingly thereafter.
C. Judicial Estoppel
Finally, Loral urges us not to dismiss or stay the claims against NSC and FSC on the grounds that they are judicially estopped from asserting any claim of ownership to the patents. Under this theory, the representations made by NSC to the federal court in California during the discovery phase of this litigation have bound NSC and FSC and prohibit them from taking a contrary position in this or any other litigation.
Judicial estoppel is a rarely used doctrine and exists to protect the court, not a party, from a party's chicanery. In re Cassidy, 892 F.2d 637, 641 (7th Cir. 1990), cert. denied, 498 U.S. 812, 112 L. Ed. 2d 24, 111 S. Ct. 48 (1991). "The principle is that if you prevail in Suit #1 by representing that A is true, you are stuck with A in all later litigation growing out of the same events." Eagle Found., Inc. v. Dole, 813 F.2d 798, 810 (7th Cir. 1987). Inconsistencies in litigation are not a rare occurrence as discovery develops shedding new light on previously made allegations requiring adjustment. "The offense is not taking inconsistent positions so much as it is winning, twice, on the basis of incompatible positions." Id.
Judicial estoppel is not recognized by some circuits. See United States v. 49.01 Acres of Land, 802 F.2d 387, 390 (10th Cir. 1986) ("The Tenth Circuit, however, has rejected the doctrine of judicial estoppel."); Konstantinidis v. Chen, 200 U.S. App. D.C. 69, 626 F.2d 933 (D.C. Cir. 1980) (stating that the D.C. Circuit has not adopted the doctrine and finds nothing to warrant its adoption). The Second Circuit has adopted it but infrequently. Four cases have set forth the factors required to be shown. Bates v. Long Island R.R. Co., 997 F.2d 1028, 1037 (2d Cir. 1993); Merrill Lynch, Pierce, Fenner & Smith v. Georgiadis, 903 F.2d 109 (2d Cir. 1990); Young v. United States Dep't of Justice, 882 F.2d 633, 639-40 (2d Cir. 1989), cert. denied, 493 U.S. 1072, 107 L. Ed. 2d 1023, 110 S. Ct. 1116 (1990); Sperling v. United States, 692 F.2d 223, 227-29 (2d Cir. 1982), cert. denied, 462 U.S. 1131, 77 L. Ed. 2d 1366, 103 S. Ct. 3111 (1983). The Bates court stated that the prior inconsistency must have been adopted by the court in some manner and the party must have succeeded and is now asserting a position adverse to that position.
Here, NSC and FSC disavowed ownership in discovery proceedings at a time at which they were not a party and ostensibly had no interest. NSC and FSC assert that as they understood the situation at that time, their statements were accurate but information has come to light since then that has led to the California state action.
There was no final adjudication of the ownership question. The fact that Magistrate Judge Hamilton stated that Loral owned the patents is not dispositive; she stated what was commonly thought to be the case at that time. There is no indication that Magistrate Judge Hamilton heard evidence as to the ownership question and thereby resolved it. Thus, the Magistrate's statement has no conclusive weight and it cannot be said that a final judgment adverse to NSC and FSC's position at that time was obtained. Indeed, NSC was ordered to comply with the subpoena insofar as licensing agreements were to be turned over. Thus, even if the magistrate's order was conclusive as to ownership, NSC can hardly be characterized as the winner on its motion to be relieved of the requirement of complying with the subpoena. Judicial estoppel is not present here.
It is hereby ordered that these two related actions be stayed until resolution of the litigation that is currently before the California state court.
DATE: Brooklyn, New York
January 7, 1994
Sterling Johnson, Jr.