The opinion of the court was delivered by: Hon. John E. Jones III
THE BACKGROUND OF THIS ORDER IS AS FOLLOWS:
Before the Court in this Declaratory Judgment action is Defendant MarvelSchebler Aircraft Carburetors, LLC's ("MSA" or "Defendant") Motion to Dismiss the Complaint or, in the alternative, Transfer Venue ("the Motion"). (Doc. 6.) Defendant filed the Motion on October 25, 2010 and a Brief in Support thereof (Doc. 15) on November 4, 2010. Plaintiff AVCO Corporation ("AVCO" or "Plaintiff") filed its Brief in Opposition (Doc. 18) on November 24, 2010, and Defendant filed its Reply on December 7, 2010 (Doc. 20). Defendant filed, with leave, a Supplement on January 14, 2011 (Doc. 32), to which Plaintiff replied on January 18, 2011 (Doc. 34). Accordingly, the Motion is ripe for disposition.
The following background facts and all reasonable inferences taken therefrom are viewed in the light most favorable to Plaintiff as the non-moving party.
Plaintiff, through its Lycoming Engine Division, is a manufacturer of aircraft engines, with a facility in Williamsport, Pennsylvania. Defendant, a company organized and located in North Carolina,was formed in 2008 to acquire the carburetor assets of Precision Airmotive Corporation. Since Defendant acquired these assets, it has sold to Plaintiff's Lycoming Engine Division carburetors of various types that are the subject of this action, namely Model Numbers MA-3PA, MA-3SPA, MA-4-5, MA-4SPA, and HA-6 ("the Model Numbers"). At some point, Plaintiff began purchasing carburetors that use the same Model Number designations from an alternative supplier, AVStar Fuel Systems, Inc. ("AVStar").
MSA alleges that the Model Numbers are trademarked, while AVCO maintains that the Model Numbers are merely common and generic terms that are used in common parlance to describe the flange and bore sizes of carburetors in a
manner that relates to the industry standards. Defendant did, indeed, apply for a trademark to register the Model Numbers with the U.S. Patent and Trademark Office ("USPTO") in January, 2010, and the applications were published in June, 2010. MSA filed an infringement action against AVStar in the United States District Court for the Middle District of North Carolina, and asserted claims under the Lanham Act and North Carolina state laws related to AVStar's labeling of carburetors with the Model Numbers ("the AVStar Action"). AVStar began bankruptcy proceedings in United States Bankruptcy Court for the Southern District of Florida in May, 2010, and MSA intervened in the Bankruptcy Action to file a Complaint similar to the AVStar Action ("the Bankruptcy Action").
During the course of the Bankruptcy Action, MSA and AVCO entered into discussions regarding a potential settlement and, apparently, each party was preparing to file related actions. A telephonic settlement conference was scheduled on September 29, 2010. Defendant filed an affirmative infringement action earlier that same afternoon in the Middle District of North Carolina ("the North Carolina Action"). The telephone settlement conference was unsuccessful, and Plaintiff filed the instant action shortly thereafter on the same date. Neither party indicated to the other that it was preparing to file the subject actions. (Doc. Plaintiff thus initiated the instant action by filing a Complaint for Declaratory Relief (Doc. 1) on September 29, 2010. Plaintiff seeks a declaration that the use of the Model Numbers does not violate 15 U.S.C. § 1125 because the terms are descriptors of functional aspects of carburetors rather than protectable trademarks. In response, Defendant filed the instant Motion to Dismiss or Transfer, alleging that the Court should exercise its discretion under 28 U.S.C. § 2201 to decline the instant action and either dismiss the action or transfer it to the Middle District of North Carolina, where the affirmative action for trademark infringement is currently pending.
Defendant notified the Court in its January 14, 2011 Supplemental Brief (Doc. 32) that, pursuant to MSA's Motion for Abstention in the Bankruptcy Case, the District Court for the Southern District of Florida relinquished jurisdiction over the adversary proceeding and lifted the automatic stay over the AVStar Action that was initiated when the bankruptcy proceedings began. Thus, the Middle District of North Carolina now has two pending related cases -- the action against AVStar and the action against AVCO.
In support of the Motion, MSA requests that the Court dismiss the action because of the "first-to-file" rule or transfer the action to the Middle District of North Carolina because it is a more convenient forum in light of the action that is already pending there. AVCO argues that application of the first-to-file rule is inapt because of MSA's alleged bad faith in filing the action in North Carolina and because the instant litigation has developed further than the North Carolina Action. Further, AVCO argues that the balances of conveniences favors litigation in Pennsylvania, and thus transfer would be in appropriate.
The first-to-file rule is a principal promoting sound administration and comity that was long ago adopted in the Third Circuit, and advises that, "in all cases of concurrent federal jurisdiction, the court which first has possession of the subject must decide it." Crosley Corp. v. Hazeltine Corp., 122 F.2d 925, 929 (3d Cir. 1941) (quoting Smith v. M'Iver, 22 U.S. (9 Wheat.) 532 (1824)). This rule is applied in instances in which more than one action involves the same parties and same issues, and is applied to ensure that litigants "have a single determination of their controversy, rather than several decisions which if they conflict may require separate appeals to different circuit courts of appeals." EEOC v. University of Pennsylvania, 850 F.2d 969, 974 (3d Cir. 1988). Unusual circumstances, however, can warrant a departure from the rule. Thus, when deciding to retain or relinquish jurisdiction over the later-filed action, a district court should consider whether circumstances such as bad faith, forum shopping, or inequitable conduct are present.
Plaintiff asserts that the first-filed rule is inapplicable, or the propriety of its application is at least dubious, because both cases were filed on the same day, and we tend to agree. Though MSA was, in fact, the first to institute litigation, that filing was merely hours before AVCO filed this action. The rule is intended to promote sound judicial administration rather than invite races to the courthouse, and, because we also find cause to grant the Motion on other grounds, we will not risk vindicating suspect attempts at gaining a tactical advantage. Our inquiry does not end at this point, however, because we must consider in the alternative whether this action should be ...