IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
March 23, 2009
The opinion of the court was delivered by: John R. Padova, J.
AND NOW, this 23rd day of March, 2009, upon consideration of Defendant CollegeSource, Inc.'s Motion to Dismiss and/or Transfer (Docket No. 8), Plaintiff AcademyOne, Inc.'s Response thereto, and Defendant's Reply, and after hearing argument from the parties on March 19, 2009, IT IS HEREBY ORDERED that the Motion is DENIED.
AcademyOne commenced the instant action against CollegeSource on December 8, 2008. It asserts three Lanham Act claims against CollegeSource, for false advertising, cybersquatting, and trademark infringement. See 15 U.S.C. § 1125. Specifically, AcademyOne alleges that CollegeSource both falsely advertised that it holds copyrights to the Digitized Information and registered and used a domain name that consumers are likely to confuse with AcademyOne's domain name. In its Motion to Dismiss and/or Transfer, CollegeSource argues that we should either dismiss this action or transfer it to the Southern District of California pursuant to the First-Filed Rule or the Compulsory Counterclaim Rule. Alternatively, it requests that we stay this action until the jurisdictional issues being litigated in California are resolved. For the following reasons, we deny the Motion in its entirety.
When two cases are filed in separate courts and the later-filed case is "'truly duplicative'" of the previously-filed case, the First-Filed Rule permits a court to stay, enjoin, or transfer the later-filed action. Grider v. Keystone Health Plan Cent., Inc., 500 F.3d 322, 334 n.6 (3d Cir. 2007) (quoting Smith v. SEC, 129 F.3d 356, 361 (6th Cir. 1997)); Keating Fibre Intern., Inc. v. Weyerhaeuser Co., Inc., 416 F. Supp. 2d 1048, 1051 (E.D. Pa. 2006) (citing FMC Corp. v. AMVAC Chem. Corp., 379 F. Supp. 2d 733, 737-38 (E.D. Pa. 2005)); Crosley Corp. v. Hazeltine Corp., 122 F.2d 925, 929 (3d Cir. 1941) ("'In all cases of federal concurrent jurisdiction, the court which first has possession of the subject must decide it.'" (quoting Smith v. McIver, 22 U.S. (9 Wheat.) 532 (1824))). To be "truly duplicative," each of the two cases "must be materially on all fours with the other," and "'the issues must have such an identity that a determination in one action leaves little or nothing to be determined in the other.'" Grider, 500 F.3d at 334 n.6 (quoting Smith, 129 F.3d at 361).
A district court may also dismiss, transfer or stay an action pursuant to the Compulsory Counterclaim Rule if it "becomes aware that the action involves a claim that should be a compulsory counterclaim in another pending federal suit." 6 Charles Allen Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1418 (2d ed. 1990). Federal Rule of Civil Procedure 13(a)(1), which concerns compulsory counterclaims, provides as follows:
A pleading must state as a counterclaim any claim that--at the time of its service--the pleader has against an opposing party if the claim:
(A) arises out of the transaction or occurrence that is the subject matter of the opposing party's claim; and
(B) does not require adding another party over whom the court cannot acquire jurisdiction.
The Third Circuit has explained as follows:
For a claim to qualify as a compulsory counterclaim, there need not be precise identity of issues and facts between the claim and the counterclaim; rather, the relevant inquiry is whether the counterclaim "bears a logical relationship to an opposing party's claim." Xerox Corp. v. SCM Corp., 576 F.2d 1057, 1059 (3d Cir. 1978). The concept of a "logical relationship" has been viewed liberally to promote judicial economy. Thus, a logical relationship between claims exists where separate trials on each of the claims would "involve a substantial duplication of effort and time by the parties and the courts." Id. Such a duplication is likely to occur when claims involve [many of] the same factual issues, the same factual and legal issues, or are offshoots of the same basic controversy between the parties. See id.; Great Lakes Corp. v. Herbert Cooper Co., 286 F.2d 631, 634 (3d Cir. 1961). In short, the objective of Rule 13(a) is to promote judicial economy, so the term "transaction or occurrence" is construed generously to further this purpose.
Transamerica Occidental Life Ins. Co. v. Aviation Office of Am., Inc., 292 F.3d 384, 389-90 (3rd Cir. 2002) (footnote omitted).
Under these circumstances and on this record, we cannot find that there is a "logical relationship" between the claims in the two cases that would give rise to a substantial duplication of effort and subvert the interests of judicial economy. Rather, it appears at this time that the two actions, although involving the same parties and the same competitive relationship, are separate and distinct and can proceed simultaneously without substantial duplication. We therefore deny CollegeSource's Motion to Dismiss and/or Transfer.
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