action. The complaints in this case and in the California action in part, seek an adjudication as to whether Quality King's purchase and resale of KMS products constitutes intentional interference with contract or violates other common law tort theories. Compare Compl. P 18; with Compl. PP 17-26, KMS Research, Inc. v. Quality King Distributors, Inc., BC158155 (Cal. Sup. Ct. September 27, 1996) (California complaint). Further, according to KMS, all necessary parties cannot be joined in the instant action such as the other defendants in the California action which the defendant alleges "are engaged in a conspiracy to wrongfully purchase and distribute KMS products."
In the Court's view, while this argument has some facial appeal, it is insufficient to warrant dismissal or imposition of a stay at this early juncture. Rather, these contentions are better suited as part of a motion to transfer venue pursuant to 28 U.S.C. § 1404(a), should KMS choose to make such a motion. In making this statement, the Court makes no determination as to whether, as the plaintiff argues, that there is any meaningful distinction between the allegations set forth in the two complaints in these companion cases.
4. Injury to federal-state relationships
The defendant further maintains that failure to dismiss or stay this action will injure "federal-state relationships." See Beacon Constr. Co. v. Matco Elec. Co., 521 F.2d 392, 397 (2d Cir. 1975). According to KMS, under recent California case law, Quality King would be prohibited from raising its declaratory judgment cause of action by way of a counterclaim. See Hood v. Superior Court, 33 Cal. App. 4th 319, 39 Cal. Rptr. 2d 296 (Ct. App. 2d Dist. 1995). Accordingly, permitting this action to continue would be tantamount to allowing the plaintiff to do an end run around California law.
In Hood, the plaintiff United Chambers Administrators ("UCA") filed suit against John Hood, one of its insurance agents for, among other things, violation of a non-competition clause. Hood cross complained for breach of contract and other unspecified torts. UCA then filed for summary adjudication pursuant to California Code of Civil Procedure section 437c(f)(1). This motion was denied because it failed to dispose of any single cause of action as required by the state statute. See Cal. Code Civ. P. § 437c(f)(1). UCA then amended its complaint to add a claim for declaratory relief with respect to the same issue and a subsequent motion for summary adjudication on this claim was granted.
On appeal, the decision of the trial court was reversed. The California appellate court held that the new cause of action for declaratory relief was subsumed in other causes of action and therefore unnecessary and superfluous. Accordingly, the use of this procedural device to circumvent the requirements of California Code of Civil Procedure section 437c(f)(1) was inappropriate.
KMS argues that this if this Court denies its motion to dismiss or for a stay, such a decision would be tantamount to permitting Quality King to maintain a declaratory judgment claim where it would otherwise not be permitted to under California law because the claims alleged in the New York complaint would be subsumed in the causes of action alleged in the California complaint. See Hood, 33 Cal. App. at 323-34, 39 Cal. Rptr. 2d at 298-99.
In the Court's view, assuming that there is merit to the defendants' position, a finding that the Court is unwilling to make at this time, this argument seems better suited to motion to transfer venue pursuant to 28 U.S.C. § 1404(a), rather than one to dismiss or to stay. See J. Lyons & Co., 892 F. Supp. at 492 (recognizing familiarity with governing law as reason to grant motion to transfer). Further, at this early stage in the litigation, it is not clear whether California or New York law would govern the issues raised in the Complaint before this Court because it is not clear where the facts underlying Quality King's claims took place.
5. Forum shopping
Finally, KMS argues that its motion should be granted because permitting this action to continue would foster forum shopping. See Great American Ins. Co. v. Houston Gen. Ins. Co., 735 F. Supp. 581, 586 (S.D.N.Y. 1990) (recognizing that the Declaratory Judgment Act should not be used as a tool for forum shopping). According to the defendant, based on the facts set forth above, "there can be no question that Quality King filed the instant declaratory judgment action in an attempt to deprive KMS of [its] choice of forum." On August 22, 1996, KMS sent the demand letter which "reminded Quality King of the large punitive damage judgment it sustained in a suit brought by another manufacturer . . . in . . . California." As a result, according to the defendant, the plaintiff made a preemptive strike against a second large verdict by filing suit in New York. The Court is unpersuaded.
There is simply no way for the Court to determine at this juncture the motivation for the plaintiff's decision to file this lawsuit in New York. Accordingly, in an exercise of its discretion under Wilton and Brillhart, the Court, at this time, declines to impose the sanctions of dismissal or a stay based on a finding of forum shopping.
After reviewing the parties' submissions, and hearing oral argument, and for the reasons set forth above, it is hereby
ORDERED, that the defendant's motion to dismiss, or in the alternative for a stay, of this case is denied.
Dated: Uniondale, New York
November 16, 1996
Hon. Arthur D. Spatt
United States District Judge
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