Commercial Litigation and Arbitration

First-Filed Rule and Forum Shopping — Noerr-Pennington Baselessness = Rule 11

From CBS Interactive Inc. v. NFL Players Ass’n, Inc., 2009 U.S. Dist. LEXIS 36800 (D. Minn. April 28, 2009):

[First-Filed Rule and Forum Shopping]

As an initial matter, the parties dispute the applicability of the "first-filed rule," which provides that "when parallel litigation has been instituted in separate courts," priority is given to "the party who first establishes jurisdiction." Keymer v. Mgmt. Recruiters, Int'l Inc., 169 F.3d 501, 503 n.2 (8th Cir. 1999). The first-filed rule gives a district court discretion to dismiss a later-filed action or transfer it if an action involving the same parties and issues was filed earlier in a different district. See Slidell, Inc. v. Archer Daniels Midland Co., No. Civ. 02-4841, 2003 WL 22050776, at *4 (D. Minn. Sept. 2, 2003) (citing Anheuser-Busch, Inc. v. Supreme Int'l Corp., 167 F.3d 417, 419 (8th Cir. 1999) and Orthmann v. Apple River Campground, Inc., 765 F.2d 119, 121 (8th Cir. 1985)). However, the first-filed rule "is not intended to be rigid, mechanical, or inflexible, but is to be applied in a manner best serving the interests of justice," and the "prevailing standard is that in the absence of compelling circumstances, the first-filed rule should apply." Nw. Airlines, Inc. v. Am. Airlines, Inc. , 989 F.2d 1002, 1005-07 (8th Cir. 1993). Two "red flags" that might signal such "compelling circumstances" are (1) the first suit was filed after the other party gave notice of its intention to sue and (2) the first suit was primarily for declaratory relief. Boatmen's First Nat'l Bank of Kansas City v. Kansas Public Employees Ret. Sys., 57 F.3d 638, 641 (8th Cir. 1995). Additionally, courts decline to apply the first-filed rule where there is forum shopping or bad faith. See Alltrade, Inc. v. Uniweld Prods., Inc., 946 F.2d 622, 628 (9th Cir. 1991); Equal Employment Opportunity Comm'n v. Univ. of Penn., 850 F.2d 969, (3d Cir. 1988); William Gluckin & Co. v. Int'l Playtex Corp., 407 F.2d 177, 178 (2d Cir. 1969).

Defendants assert that even if this action is the first-filed--an issue which they dispute--the rule should not apply because CBS Interactive was engaging in "blatant forum shopping" when it initiated this action in this district to take advantage of arguably favorable law to CBS Interactive announced by the Eighth Circuit in C.B.C. Distribution…. CBS Interactive levies its own accusation of forum shopping in response, claiming that Defendants' request to transfer venue to the Southern District of Florida is motivated by a perception that the law in that district and circuit is more favorable to their arguments…. After reviewing the parties' arguments, it appears, not surprisingly, that both CBS Interactive and Defendants are forum shopping. Minnesota is no more closely connected to the controversy in this action than any other forum in which an NFL team is located; CBS Interactive most probably chose to litigate in Minnesota to avail itself of Eighth Circuit precedent established by C.B.C. Distribution, the fantasy baseball litigation. On the other hand, it is equally likely that Defendants prefer the Southern District of Florida primarily because that court is not bound by the decision in C.B.C. Distribution and has issued a decision that Defendants perceive to be favorable to their position. Given the likely forum-shopping by both CBS Interactive and Defendants, the Court declines to rigidly apply the first-filed rule and will instead focus on the three factors typically involved in a motion to transfer pursuant to § 1404.

[Noerr-Pennington Baselessness = Rule 11]

The Noerr-Pennington doctrine, which is premised on the First Amendment right to petition the government for redress of grievances, is derived from two antitrust cases decided by the Supreme Court. See Eastern R.R. President's Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961); United Mine Workers of Am. v. Pennington, 381 U.S. 657 (1965). Under the doctrine, the act of filing a lawsuit is viewed as a form of petitioning activity and is therefore immune from antitrust or tort liability.... Because "[t]he right to petition means more than simply the right to communicate directly with the government," protection under the doctrine "necessarily includes those activities reasonably and normally attendant to effective petitioning." ***

The protection afforded under the Noerr-Pennington doctrine is not limitless, and an exception exists for litigation found to be "a mere sham intended to disguise tortious or anti-competitive liability." ... The Supreme Court has explained that this "sham" exception applies only when (1) the litigation is shown to be "objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits" and (2) the litigation is subjectively motivated by bad faith in the sense that it is initiated as a "anticompetitive weapon." Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60-61 (1993) (quotations omitted). Only when the challenged litigation is objectively meritless may a court proceed to the second step and examine the litigant's subjective motivation. ... The Eighth Circuit also has elaborated on the sham exception:

It is only where a defendant's resort to the courts is accompanied or characterized by illegal and reprehensible practices such as perjury, fraud, conspiracy with or bribery of government decision makers, or misrepresentation, or is so clearly baseless as to amount to an abuse of process, that the Noerr-Pennington cloak of immunity provides no protection.

Razorback Ready Mix Concrete Co., Inc. v. Weaver, 761 F.2d 484, 487 (8th Cir. 1985) (emphasis added). The sham exception is "narrow," and … the party attempting to invoke the exception, "bears a heavy burden of demonstrating that the lawsuit is objectively meritless." ***In Prof'l Real Estate Investors, the Court suggested that the standard for determining whether a litigation is objectively baseless is similar to the standard for attorney sanctions under Rule 11 of the Federal Rules of Civil Procedure. 508 U.S. at 60. Litigation is not objectively baseless so long as it "was arguably 'warranted by existing law' or at the very least was based on an objectively 'good faith argument for the extension, modification, or reversal of existing law.'" Id. (quoting Fed. R. Civ. P. 11). The analogy to the Rule 11 standard is supported by the Eighth Circuit's explanation that the litigation must be "so clearly baseless as to amount to an abuse of process." Razorback, 761 F.2d at 487.

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