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Power Play 1 LLC v. Norfolk Tide Baseball Club, LLC

United States District Court, S.D. New York

January 9, 2018

POWER PLAY 1 LLC, et ano., Plaintiffs,

          OPINION & ORDER

          WILLIAM H. PAULEY III, District Judge.

         Defendants Norfolk Tide Baseball Club, LLC (“Norfolk Tide”) and Tides Baseball Club L.P. (“Tides, ” and together with Norfolk Tide, the “Tides Defendants”) move to dismiss this action under Rule 12(b)(3) for improper venue, or alternatively, to transfer this action to the U.S. District Court for the Eastern District of Virginia. For the reasons that follow, the Tides Defendants' motion to dismiss for improper venue is denied and the motion to transfer this action to the Eastern District of Virginia is granted.


         This Court briefly revisits the underlying facts relevant to the instant motions.[1]On September 30, 2016, Power Play 1 LLC (“Power Play”) purchased Norfolk Tide's ownership interest in Admirals ECHL Hockey LLC (“Admirals ECHL”), an operating company that managed a Virginia-based minor league professional hockey team. Power Play's purchase of Admirals ECHL was effectuated by a Membership Interest Purchase Agreement (the “Agreement”) between Power Play and Norfolk Tide. According to Power Play, however, the Tides Defendants fraudulently induced it into entering the Agreement by failing to disclose certain Admirals ECHL contract obligations. The coup de grâce was that Norfolk Tide also purportedly concealed the fact that Norfolk Tide never existed, and as such, did not even own any transferable obligations or interest in Admirals ECHL. Finally, Power Play avers that the Tides Defendants converted Admirals ECHL monies as well as hockey team merchandise and memorabilia.

         After discovering these misrepresentations and omissions, Power Play demanded indemnification pursuant to the Agreement. (First Amended Complaint, ECF No. 31 (“Compl.”) ¶¶ 23-24 & Ex. 2.) Following several exchanges between the parties, Power Play's counsel informed counsel for the Tides Defendants on May 12, 2017 that Power Play intended to file suit unless it received a settlement offer from the Tides Defendants by May 18, 2017. (Declaration of Thomas T. Reith, ECF No. 50 (“Reith Decl.”), Ex. 1.) On May 18, 2017, counsel for the Tides Defendants made a settlement offer and suggested the parties mediate the dispute. (Reith Decl., Ex. 1.) Four days later, Power Play rejected the settlement offer as well as mediation. (Reith Decl., Ex. 1.) In that correspondence, Power Play's counsel asked whether counsel for the Tides Defendants was authorized to accept service. (Reith Decl., Ex. 1.)

         On May 23, 2017, the Tides Defendants commenced a declaratory judgment action against Power Play and Admirals ECHL in the Eastern District of Virginia (the “Virginia Action”). (Declaration of R. Johan Conrod, Jr., ECF No. 38 (“Conrod Decl.”), Ex. 1.) On June 14, 2017, Power Play sought and received an extension of time until June 28, 2017 to respond to the complaint in the Virginia Action. (Conrod Decl., Ex. 1.) Power Play and Admirals ECHL brought the instant action against the Tides Defendants for rescission, damages, and declaratory relief on June 27, 2017-one day before its deadline to respond in the Virginia Action.


         I. Motion to Dismiss

         A. Whether Venue Is Proper

         As a threshold matter, the Tides Defendants do not appear to dispute that this action is properly venued in the Southern District of New York. This Court concludes the same. Whether venue is proper is determined solely by reference to the applicable federal statutory venue provisions, regardless of whether a forum selection clause exists. Atl. Marine Const. Co. v. U.S. Dist. Court for the W. Dist. of Tex., 134 S.Ct. 568, 577-78 (2013). In relevant part, venue may be proper under 28 U.S.C. § 1391(b) in the judicial district in which each defendant resides, if all defendants are residents of the State in which the district is located. An entity defendant is deemed to reside for venue purposes in “any judicial district in which such defendant is subject to the court's personal jurisdiction with respect to the civil action in question.” 28 U.S.C. § 1391(c).

         Here, venue is proper in the Southern District of New York based on the Agreement, under which each party “irrevocably submit[ted] to the exclusive jurisdiction” of the United States federal courts and the courts of the State of New York for actions arising out of or based upon the Agreement.[2] (Compl., Ex. 1 (“Agreement”) § 7.12.) Because the Tides Defendants are subject to this Court's personal jurisdiction, see Coface v. Optique Du Monde, Ltd., 521 F.Supp. 500, 506 (S.D.N.Y. 1980), venue is proper in the Southern District of New York under § 1391(b). As such, the Tides Defendants' motion to dismiss this action for improper venue under Rule 12(b)(3) is denied. See Atl. Marine, 124 S.Ct. at 577 (explaining that Rule 12(b)(3) allows dismissal “only when venue is ‘wrong' or ‘improper'”).

         B. First-Filed Presumption

          Defendants also seek to dismiss this action in favor of the earlier-filed Virginia Action under the first-filed presumption, which provides that when lawsuits with the same parties and issues are pending in two federal districts, the first-filed suit generally has priority. Ontel Prods., Inc. v. Project Strategies Corp., 899 F.Supp. 1144, 1150 (S.D.N.Y. 1995); see N.Y. Marine & Gen. Ins. Co. v. Lafarge N. Am., Inc., 599 F.3d 102, 112 (2d Cir. 2010). Although there is a “strong presumption” in favor of the first-filed suit, Reliance Ins. Co. v. Six Star, Inc., 155 F.Supp.2d 49, 55 (S.D.N.Y. 2001), this presumption is not to be applied rigidly or mechanically simply based on the dates the actions were filed, Liberty Mut. Ins. Co. v. Fairbanks Co., 17 F.Supp.3d 385, 392 (S.D.N.Y. 2014); see Emp'rs Ins. of Wausau v. Fox Entm't Grp., Inc., 522 F.3d 271, 275 (2d Cir. 2008) (explaining that the “first-filed rule” is not an “invariable mandate, ” but a rebuttable presumption). Accordingly, the Second Circuit has recognized that the first-filed presumption is inapplicable in only two scenarios: (1) if the balance of convenience weighs in favor of the second action, or (2) if special circumstances justify giving priority to the second action. N.Y. Marine & Gen. Ins. Co., 599 F.3d at 112.

         Although the special circumstances that warrant deviation from the first-file presumption are rare, Emp'rs Ins. of Wausau, 522 F.3d at 275, one such circumstance exists when the first-filed suit is an improper anticipatory filing. Ontel Prods., 899 F.Supp. at 1150. An improper anticipatory filing is one “made under the apparent threat of a presumed adversary filing the mirror image of that suit in a different federal district.” Ontel Prods., 899 F.Supp. at 1150. While declaratory judgments are often anticipatory by definition, the “mere fact that an action is brought as one for a declaratory judgment ‘does not necessarily [mean that it] constitute[s] an anticipatory filing for the purposes of an exception to the first filed rule.'” Ontel Prods., 899 F.Supp. at 1150 (alterations in original). Instead, “for a declaratory judgment action to be anticipatory, it must be filed in response to a direct threat of litigation that gives specific warning as to deadlines and subsequent legal action.” Emp'rs Ins. of Wausau, 522 F.3d at 276. Thus, while a declaratory judgment action that is prompted by receipt of a notice letter is routinely a litmus test for anticipatory conduct, Chicago Ins. Co. v. Holzer, 2000 WL 777907, at *3 (S.D.N.Y. June 16, 2000), pre-suit correspondence that merely seeks information or settlement negotiations without “indicia of impending litigation” is insufficient, Cephalon, Inc. v. Travelers Cos., Inc., 935 F.Supp.2d 609, 614 (S.D.N.Y. 2013). Finally, an anticipatory filing is “improper” when it “attempts to exploit the first-filed rule by securing a venue that differs from the one that the filer's adversary would be expected to choose.” Ontel Prods., 899 F.Supp. at 1150.

         Before addressing Power Play's contention that the Virginia Action constitutes an improper anticipatory filing, this Court notes that judges in this District have generally adhered to the principle that the court before which the first-filed action was brought should decide whether the first-filed presumption or an exception applies. Schnabel v. Ramsey Quantitative Sys., Inc., 322 F.Supp.2d 505, 510 (S.D.N.Y. 2004). This decision rule is concerned with avoiding “the possibility of inconsistent rulings on discretionary matters as well as duplication of judicial effort.” Donaldson, Lufkin & Jenrette, Inc. v. L.A. Cty., 542 F.Supp. 1317, 1321 (S.D.N.Y. 1982). But this case presents unique circumstances justifying departure from the rule. Although the Virginia Action was filed first, the district judge in that action held Power Play and Admirals ECHL's motions to dismiss, stay, or transfer the Virginia Action in ...

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