First to File Rule and Transferring Venue
In re Nitro Fluids LLC (Fed. Cir. 2020)
- 2018 — Cameron sued Nitro in S.D. Tex (Houston) where both companies are located. That case is still pending.
- 2020 — Cameron separately sued Nitro in W.D. Tex (Waco). The new action accuses the same Nitro products but asserts different (albeit related) patents. The patents asserted include overlapping patent-families and inventorship. Cameron also separately sued “Butch’s Rathole & Anchor Service, Inc.” on the patents in W.D. Tex.
The courts generally follow a first-to-file presumption for situations like this where there are two different cases filed in two different venues that involve the same parties and substantially overlapping issues. The presumption is that the cases should both be tried in the same venue, and that venue is the one where the first-case was filed. Wright & Miller explains:
Although the burden generally is on the moving party to establish that there should be a change of venue, when two courts have concurrent jurisdiction over a dispute involving the same parties and issues, as a general proposition, the forum in which the first-filed action is lodged has priority.
Fed. Prac. & Proc. § 3854 Standard in Considering Transfer—Interest of Justice. I should also note here that the Federal Circuit repeatedly refers to this as the “first-to-file rule” while I think it is more of a presumption. Their naming of this as a “rule” foreshadows their conclusion — that it must be followed.
Nitro’s motion to transfer was filed under 28 U.S.C. § 1404. That statute permits change of venue for convenience and in the interest of justice. Typically this type of transfer analysis considers a balance of public and private factors: interest of justice; judicial economy; court’s familiarity with the law; local interest in deciding the case; convenience of the parties and witnesses; plaintiff’s forum preference; etc.
Here, Judge Albright walked through the traditional § 1404 factors and concluded that the interest-of-justice weighed in favor of keeping the lawsuit in Waco. In particular, Judge Albright found that his docket was much lighter and faster than those of the Houston judges, and that there were also other parallel cases in W.D. Tex. involving other defendants that could lead to inconsistent verdicts.
[Judge Albright’s] determination rested on the legal proposition that the first-to-file rule is only applicable when the balance of factors favors the first-filed court.
That proposition is contrary to law.
Slip Op. (Internal citations eliminated).
To be clear, the court is not saying that the Section 1404 factors are irrelevant. Rather, as a matter of procedure, the first-to-file rule sticks absent “compelling circumstances” to justify an exception. Those compelling circumstances might come from a traditional Section 1404 factor.
The court justified this departure from the ordinary balancing because the second-filer “is insisting on having two substantially overlapping proceedings continue at the same time before two different courts.”
In its mandamus opinion, the court did not order transfer, but rather vacated the original judgment and demanded that on remand the district court consider whether its justification for keeping the case is “compelling.”