United States District Court, S.D. New York
OPINION & ORDER
WILLIAM H. PAULEY III, District Judge.
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.
Court briefly revisits the underlying facts relevant to the
instant motions.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
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.)
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
Motion to Dismiss
Whether Venue Is Proper
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. §
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. (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
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.
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.
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 ...