The opinion of the court was delivered by: Kahn, District Judge.
Presently before the Court is Defendants' motion to dismiss or,
in the alternative, to stay or transfer Plaintiff's amended
complaint pursuant to 28 U.S.C. § 1404(a). For the reasons stated
herein, Defendants' motion is denied.
Plaintiff owns and operates the Aimster system, a service
through which users may exchange encrypted information or other
data, including music, movies, pictures, software, and instant
messages. The Recording Industry Association of America, Inc.
("the RIAA") is a not-for-profit trade organization whose members
engage in the creation, manufacture, and sale of musical
recordings. The RIAA, although representing the interests of its
members, does not own copyrights in any of their sound
recordings. The remaining defendants are record companies owning
copyrights to certain original sound recordings and are members
of the RIAA.
On April 3, 2001, the RIAA, on behalf of its members, sent
BuddyUSA, then the operator of the Aimster system, a
cease-and-desist letter informing it that its system was enabling
widespread infringement of its member companies' copyrights in
various sound recordings. The letter also informed BuddyUSA that
if it did not take steps to prevent the infringing activity
within one week from the date of the letter, they would be left
with "little choice but to seek additional legal remedies."
On April 11, just over one week later, John Cavalier,
Chairman-designate of BuddyUSA, contacted Frank Creighton, Senior
Vice-President of the RIAA and the author of the cease-and-desist
letter, and agreed to a meeting on April 16, 2001 to discuss the
dispute. That meeting was canceled, however, when BuddyUSA's
representatives were unable to obtain a flight from Albany, New
York, to Washington, D.C. A second meeting, scheduled for April
27, was canceled as well when BuddyUSA
informed the RIAA that it had divested itself of all interest in
the Aimster system.
On Friday, April 27, 2001, the RIAA received a letter from
BuddyUSA stating that it had "ceased administering the Aimster
service," but nevertheless offering to meet with representatives
of the RIAA to "discuss this matter further." The RIAA did
contact BuddyUSA and scheduled a meeting for the following
Monday, April 30.
That meeting also did not occur, as on April 30, 2001,
Plaintiff filed a declaratory judgment action in this Court
against the RIAA, captioned AbovePeer, Inc. v. RIAA, et al.,
No. 01-CV-0632, seeking, among other things, a declaration that
they were not "violating the copyright of any member of
RIAA."*fn1 The complaints were later amended to add seventeen
recording company defendants.
On May 24, 2001, two new actions were filed in the Southern
District of New York asserting claims against AbovePeer,
BuddyUSA, and their principal John Deep for, among other things,
vicarious and contributory copyright infringement. The first,
captioned Zomba Recording Corp., et al. v. Abovepeer, Inc., et
al., No. 01-CV-4452, was brought by twenty-two record companies,
including, but not limited to, all but three of the seventeen
record companies named in the amended complaint in this action.
The second, captioned Atlantic Recording Corp., et al. v.
Abovepeer, Inc., et al., No. 01-CV-4460, was brought by twelve
companies, among them filmed entertainment companies and record
companies, including the remaining three record companies named
in the amended complaint.
That same day, Plaintiff sought, and was granted by this Court,
an injunction preventing the record company defendants named in
the amended complaints, and those "acting in concert with them,"
from prosecuting the actions in the Southern District or
elsewhere. On May 25, Plaintiff filed three new declaratory
judgment actions in this Court, captioned AbovePeer, Inc. v.
Zomba Recording Corp., et al., No. 01-CV-0809, AbovePeer, Inc.
v. Motion Picture Assoc. of Amer., et al., No. 01-CV-0810, and
AbovePeer, Inc. v. Acuff-Rose Music Publishing, Inc., et al.,
No. 01-CV-0811. The following business day, May 29, 2001, the
Court enjoined the Defendants in these actions from commencing or
participating in any other legal actions against Plaintiff.
In determining which of two competing actions should proceed,
the well-established rule in this Circuit is that the first suit
should have priority, absent special circumstances which justify
giving priority to the second-filed suit or the showing of a
balance of circumstances favoring the second suit. See, e.g.,
City of New York v. Exxon Corp., 932 F.2d 1020, 1025 (2d Cir.
1991) ("the first court has jurisdiction to enjoin the
prosecution of the second one"); First City Nat'l Bank & Trust
Co. v. Simmons, 878 F.2d 76, 79 (2d Cir. 1989); Factors Etc.,
Inc. v. Pro Arts, Inc., 579 F.2d 215, 218 (2d Cir. 1978). A
"strong presumption" generally applies in favor of the forum of
the first-filed suit. 800-Flowers, Inc. v. Intercontinental
Florist, Inc., 860 F. Supp. 128, 131 (S.D.N.Y. 1994) (citing
Exxon, 932 F.2d at 1025).
One "special circumstance" justifying a departure from the
first-filed rule occurs when a party brings a declaratory
judgment action after receiving notice of a planned lawsuit by
the other party. See Factors, 579 F.2d at 219; Chicago Ins.
Co. v. Holzer, No. 00 Civ. 1062, 2000 WL 777907, at *3 (S.D.N Y
June 16, 2000); Mondo, Inc. v. Spitz, No. 97 Civ. 4822, 1998 WL
17744, at *2 (S.D.N.Y. Jan.16, 1998); J. Lyons & Co. Ltd. v.
Republic of Tea, Inc., 892 F. Supp. 486, 491 (S.D.N.Y. 1995). In
determining whether sufficient notice has been given, courts in
this Circuit have looked for mention of the intention to file a
law suit, a filing date, and/or a specific forum for the filing
of the suit. See, e.g., Holzer, 2000 WL 777907, at *2; Mondo,
1998 WL 17744, at *2; J. Lyons, 892 F. Supp. at 491; Employers
Insurance of Wausau v. Prudential Ins. Co. of Amer., 763 F. Supp. 46,
49 (S.D.N.Y. 1991).
In J. Lyons, for example, declaratory judgment actions were
brought by the alleged infringers following the receipt of
cease-and-desist letters and prior to suit being filed by Lyons,
the trademark holder. The letters demanded that the various
alleged infringers cease-and-desist the alleged infringement and
indicated that if they failed to do so, Lyons would be
"constrained to pursue appropriate legal steps against" them and
its attorneys would then be "authorized to consider taking
suitable legal and equitable action."
The court held under those circumstances that the alleged
infringers did not have actual notice of litigation. See J.
Lyons, 892 F. Supp. at 491. Although the letters "mentioned the
possibility of legal actions, [they] did not specify any date or
forum." Id. The court found that rather than suggesting it was
about to file suit, Lyon's actions were suggestive of
negotiations. See id.
Likewise, in Employers Insurance, the court found that a
similar cease-and-desist letter "was at best an attempt to
initiate settlement negotiations and [could not] reasonably be
construed as a notice of suit." Employers Insurance, 763
F. Supp. at 49. The "notice" letter in that case stated that the
parties were "prepared and fully intend to pursue all remedies
available" to them. Id. at 47-48. The court held that, because
the notice letter did not explicitly mention a lawsuit, a
tentative filing date, or a forum, ...