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January 8, 2002


The opinion of the court was delivered by: Swain, District Judge.


This trademark action is before the Court on motions concerning the appropriate forum for the litigation. Plaintiff Everest Capital ("Everest Capital" or "Plaintiff") is a Bermuda corporation that provides investment management services and has its principal place of business in Bermuda. Defendants Everest Funds Management ("EFM") and Everest Funds ("EF"), both Delaware corporations, offer investment management services and operate principally out of the state of Nebraska. Vinod Gupta ("Gupta" and, with EFM and EF, "Defendants") is president and sole shareholder of EFM and also serves EF as its president and in other leadership positions. On May 18, 2001. following several months of correspondence between the parties" representatives concerning Plaintiffs assertion that Defendants' use of the term "Everest" violates Plaintiffs trademark rights, EFM filed in the United States District Court for the District of Nebraska, but did not serve, a complaint, in an action against Everest Capital, seeking a declaratory judgment on the issue of EFM's use of the term "Everest."*fn1 On May 28, 2001, Plaintiff Everest Capital commenced this action, seeking damages and injunctive relief, and Plaintiff served its complaint on Defendants on May 24, 2001.

Defendants seek to dismiss this action pursuant to Federal Rule of Civil Procedure 12(b)(2), for lack of personal jurisdiction over the parties, or Rule 12(b)(3), for improper venue in this District, or on the grounds that EFM's action was the first filed. Alternatively, Defendants seek to have this action transferred to the United States Court for the District of Nebraska pursuant to 28 U.S.C. § 1404, or to stay the proceedings in this Court to allow the Nebraska action to go forward. Also pending before the Court is Plaintiffs cross-motion to preliminarily enjoin Defendants from further prosecuting the action commenced in the District of Nebraska. The parties do not dispute that the subject matter of the two actions is largely identical.

The Court has considered thoroughly all arguments made in support of and in opposition to the pending motions. For the reasons that follow, the instant action will be transferred to the United States District Court for the District of Nebraska.

The First-Filed" Rule

It is a "well-settled principle in this Circuit that where 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 and Trust Co. v. Simmons, 878 F.2d 76, 79 (2d Cir. 1989) (citing cases) (internal quotation marks omitted). This principle is known as the "first-filed rule." Although the filing of the Nebraska action preceded by five days the commencement of this case, Plaintiff argues that the Nebraska action should not be considered the first filed action for purposes of applying the rule because service of the complaint has not yet been effected in that action. EFM argues that its Nebraska action should nonetheless be treated as the first filed because EFM initially delayed serving the complaint in its Nebraska action only because it hoped that a consensual resolution might be achieved and that, since Everest Capital initiated the instant action, EFM has been attempting to serve the Nebraska complaint. EFM asserts that its efforts to effectuate service have thus far been thwarted by Plaintiffs refusal to waive service pursuant to Rule 4(d) of the Federal Rules of Civil Procedure or authorize its counsel to accept service on its behalf, and that formal service on Plaintiff in Bermuda pursuant to Hague Convention procedures is now under way. Defendants argue that Second Circuit courts recognize filing, rather than service, as the operative event for purposes of the rule.

Ample discretion is left to the lower courts in administering multifaceted litigation; courts are not to apply rules rigidly or mechanically. See Kerotest Mfg. Co. v. C-O-Tiro Fire Equipment Co., 342 U.S. 180, 183-84, 72 S.Ct. 219, 96 L.Ed. 200 (1952); Computer Assocs. Int'l, Inc. v. Altai, Inc., 893 F.2d 26, 29 (2d Cir.1990). The Second Circuit has not addressed directly the question of whether an action is considered first filed for purposes of applying the rule where service of a complaint has not been properly effected prior to the filing and service of a complaint in a second action that involves the same parties and subject matter. Judges within this District have reached divergent results in cases in which this issue has arisen. Compare Nat'l Patent Development Corp. v. American Hospital Supply Corp., 616 F. Supp. 114, 118 n. 7 (S.D.N.Y.1984) (noting that "[t]here is some support for [plaintiffs] position that jurisdiction over the person rather than the filing of the complaint is controlling for purposes of determining priority," but deciding priority based on concerns of fairness) with Berisford Capital Corp. v. Central States, et. al., 677 F. Supp. 220, 221 n. 1 (S.D.N.Y. 1988) (dismissing argument that first served action should be regarded as first filed for purposes of the rule). There is almost uniform recognition, however, of the general principle that mechanical application of a rule should not be determinative of the result in cases in which competing actions have been filed in close temporal proximity and service was not completed in the first case before the second was filed. As Judge Weinfeld put it:

In the . . . situation where each side, after a breakdown in settlement negotiations, engages in a race to the courthouse to achieve "first filed" status, the courts should be concerned with what the interests of justice require and not with who won the race.

Nat'l Patent, 616 F. Supp. at 118; see also Ivy-Mar Co., Inc. v. Weber-Stephens Prods. Co., No. 93 Civ. 5973, 1993 WL 535166 (S.D.N.Y. Dec. 22, 1993) (first-filed rule applied to permit action first filed but second served to go forward, where traditional venue factors did not favor the other forum); Aerotel, Ltd. a Sprint Corp., 100 F. Supp.2d 189, 196 (S.D.N.Y.2000) (later service of amended complaint in first-filed action held to relate back pursuant to Fed.R.Civ.P. 15(c); "[i]n any event, even if defendants are correct in their assertion that Kansas wins the "first-filed" contest, . . . 'district courts need not slavishly adhere to the first filed rule, and' . . . where circumstances dictate, `great significance should not be placed upon the dates the actions were filed.'") (citation omitted). Cf. Berisford Capital, 677 F. Supp. at 222 n. 1 ("The `first service' rule is not the law of this circuit, . . . and I see no reason to vary from what is the more predictable and more easily enforced rule adopted by what appears to be the majority of courts.")

The circumstances surrounding the failure to serve the complaint in the Nebraska action militate in favor of deeming that suit the first filed. Everest Capital is fully aware of the Nebraska action and EFM has made diligent efforts to serve its complaint. Defendants represent that attempts to effect service include: requesting that counsel for Everest Capital accept service on behalf of its client, to which request Defendants did not receive a response (DeMeules Decl. in Supp. of Defts' Mot. to Dismiss, Transfer, or Star ("DeMeules Decl."), sworn to on June 21, 2001, ¶ 5); seeking to identify a designated agent in the United States to accept service of process for Everest Capital (Second DeMeules Decl. in Supp. of Defts' Mot. to Dismiss, Transfer, or Stay, ("2nd DeMeules Decl."), sworn to Aug. 20, 2001, ¶ 3); issuing process pursuant to Rule 4(d) of the Federal Rules of Civil Procedure (DeMeules Decl. ¶ 5); and making a second attempt to obtain a waiver of service pursuant to Rule 4(d) when counsel for Everest Capital brought to Defendants' attention that the wrong Everest entity was named in the first Rule 4(d) notice (DeMeules Decl. ¶ 5).

At a pre-trial conference that was held in this matter on November 9, 2001, counsel for Defendants further represented that EFM had requested the Nebraska court to authorize service on Plaintiff in Bermuda pursuant to the Hague Convention, which request was granted on October 22, 2001, that EFM is continuing in its efforts to serve Everest Capital, and that the Nebraska district court has granted an extension of time to that end. (Tr. at 5.) It would be unjust to permit Everest Capital to benefit from the first-filed rule where but for its success in resisting the effectuation of service, Defendants might have effected service in the Nebraska suit some time ago.

Accordingly, the Nebraska suit is properly regarded as the first filed. Absent any exception to the rule that would apply here, the Nebraska suit should be allowed to proceed.*fn2 The Court thus turns to the question of whether the litigation in this District should nonetheless take precedence, either because the balance of convenience favors litigation here or because special circumstances justify deviation from the first-filed rule. See, e.g., 800-Flowers, Inc. v. Intercontinental Florist, Inc., 860 F. Supp. 128 (S.D.N.Y.1994).*fn3

Exceptions to the First-Filed Rule: Balance of Convenience and Venue Concerns

"The general rule in this Circuit is that, as a principle of sound judicial administration, the first suit should have priority, absent the showing of balance of convenience in favor of the second action or unless there are special circumstances which justify giving priority to the second." William Gluckin & Co. v. Int'l Playtex Corp., 407 F.2d 177, 178 (2d Cir. 1969) (internal quotation marks and citations omitted); see In re Griffin Indus., Inc. v. Petrojam, Ltd., 58 F. Supp.2d 212, 216 (S.D. N.Y.1999); Comedy Partners v. Street Players Holding Corp., 34 F. Supp.2d 194, 196 (S.D.N.Y.1999). It is within the sound discretion of the district court to determine whether substantive factors, including the balance of convenience, weigh against proceeding in the ...

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