United States District Court, E.D. Pennsylvania
UNLIMITED TECHNOLOGY, INC.
RICHARD LEIGHTON, a/k/a RICK LEIGHTON, DTS SECURITY, INC. and SECURE VIZUAL, LLC
purposes of applying the first-filed rule, which date governs
the analysis-the date the concurrent federal case was filed
in the state court or the date it was removed? The Third
Circuit has not decided the issue. A few district courts,
without analysis, have concluded that the operative date is
the date of removal. Other courts have used the date of
filing in the state court. We conclude that the date the
action was filed in state court is what counts.
Technology, Inc., filed this action to enforce the
restrictive covenants in defendant Richard Leighton's
employment agreement. Leighton moves to dismiss, stay, or
transfer the action to the Northern District of Georgia,
where he has a pending action to have the agreement declared
unenforceable. Invoking the first-filed rule and 28 U.S.C.
§ 1404(a), Leighton argues that this action was filed
after he had filed the action against Unlimited in the
Georgia state court, which was removed to the United States
District Court for the Northern District of Georgia. Opposing
the motion, Unlimited contends that the action in this
district was filed first because it was filed before the
Georgia state court action was removed. Unlimited also claims
that Leighton filed the Georgia action in bad faith and in
anticipation of this action.
determine whether to rely on the state court filing date or
the removal date for purposes of applying the rule, and
whether exceptions to the rule apply. If the first-filed rule
does not apply, we then analyze whether the action should be
transferred pursuant to 28 U.S.C. § 1404(a).
conclude that because the operative date for applying the
first-filed rule is the date the case was filed in the state
court and not the date of removal, the Georgia action was the
first-filed action. However, we shall not apply the
first-filed rule because the Georgia action was anticipatory
and in bad faith. Therefore, the motion to transfer shall be
dispute began when Leighton left his employment with
Unlimited, taking with him Unlimited's largest customer.
After his departure, Unlimited conducted an internal
investigation which, it alleges, revealed that he had been
planning to leave and start a competing business while still
working at Unlimited. Unlimited considered Leighton's
leaving and starting a business a breach of the non-compete
provision in his employment contract and an unauthorized
taking of trade secrets.
began his employment with Unlimited, a security services
company, in January 2014. As Unlimited's Vice President of
Sales and its highest paid employee, he earned approximately
$350, 000 annually. His employment agreement contained
non-compete, non-disclosure, and non-solicitation
Leighton joined the company, he brought with him Home Depot
as a client. When he left, he took Home Depot, which had
become Unlimited's largest customer.
parties dispute the reasons why Leighton joined Unlimited and
what transpired at the time of his departure. According to
Leighton, Unlimited reneged on its promise to give him an
equity interest in the company. He claims that he was instead
demoted in December 2015.
his departure on September 29, 2016, Leighton operated his
own security services business in Georgia, taking with him
the Home Depot account. After he announced he would be
leaving the company, Leighton alleges he and Unlimited agreed
to continue working together on some Home Depot
projects. He claims that Brent Franklin, President
of Unlimited, confirmed this agreement via email on October
disputes the existence of any post-employment agreement.
Instead, it claims that Leighton threatened to impede any
future business with Home Depot if the company attempted to
enforce the restrictive covenants in his employment
agreement.Having lost Home Depot as a client,
Unlimited agreed to serve Home Depot as Leighton's
his departure, Leighton contracted Unlimited to complete a
project for Home Depot. He contends that Unlimited failed to
adequately perform. At Home Depot's request, Leighton did
not offer Unlimited any more Home Depot work. The parties
had no further contact until the lawyers became involved.
March 31, 2017, Casey Green, counsel for Unlimited, sent
Leighton a cease-and-desist letter, demanding that Leighton
or his counsel respond by April 17, 2017 “to avoid
litigation.” On April 7, 2017, Leighton's counsel
in Georgia, Charles Hawkins, called Green to discuss
potential settlement. Green claims and Hawkins denies that
during the phone call, he assured Hawkins that suit would not
be commenced while the parties were engaged in
discussing the case with his client, Hawkins spoke to Green
again on Thursday, April 13, 2017. The attorneys dispute what
was said during this phone call. They agree Unlimited wanted
certain information. Green claims that Hawkins agreed to
“voluntarily disclose” information with Unlimited
for settlement purposes only. Hawkins counters that they
merely discussed “the possibility” of Leighton
sharing information.Hawkins insists that Green set a deadline
of Monday, April 17, for Leighton to provide the
information. Green denies that he gave any
up on the telephone conversation earlier that day, Green sent
Hawkins an email listing the documents Unlimited needed to
assess whether there was a breach of contract and a theft of
trade secrets. Green reiterated that Unlimited was still
interested in reaching “an amicable pre-litigation
settlement.” The email did not set a deadline.
ignored Green's email. Instead, without warning, he filed
suit in the Georgia state court on April 18,
2017. In his complaint, Leighton seeks a
declaration to clarify his rights and obligations, and to
avoid violating his employment agreement. Specifically, he
asks the court to declare that he did not violate any
provision of his employment agreement because the parties had
entered into a post-employment agreement that resulted in a
novation, or at least, a substantial modification of the
after Unlimited filed its motion in this action did Hawkins
attempt to justify filing the Georgia action without notice.
He explains that the document request was “far more
extensive” than what they had discussed on the
phone. He states that “[a]ny modestly
experienced attorney would know that producing such a large
volume of documents on three days' notice would not be
humanly possible.” Hawkins claims that he “did not
take seriously” that Unlimited was still interested in
settling, despite Green's email stating the
contrary. Hawkins suggests that Green
“should have concluded that my clients were not
interested in continuing settlement discussions after that
deadline passed without any further communications from
me.” Yet, he discussed none of these concerns
with Green. If he viewed the situation as he now claims, he
should have addressed his concerns with Green. Instead, he
gave the impression that Leighton was cooperating and
did not learn that Leighton had filed the Georgia action
until April 24, 2017, when its registered agent in Georgia
was served with a copy of the complaint.Two days
later, on April 26, 2017, Unlimited filed this action in the
Eastern District of Pennsylvania. Unlimited removed
Leighton's state court complaint to the Northern District
of Georgia on May 3, 2017.
has moved to dismiss, stay, and/or transfer this action. He
contends that the first-filed rule favors dismissing or
transferring this action to the Northern District of Georgia.
Opposing the motion, Unlimited argues that the action here
was filed before the Georgia action was removed to the
federal court there, giving this action priority under the
first-filed rule requires, absent extraordinary
circumstances, that federal cases sharing substantially
similar subject matter be decided by the court where the
litigation was first filed. EEOC v. Univ. of Pa.,
850 F.2d 969, 971 (3d Cir. 1988), aff'd on other
grounds, 493 U.S. 182 (1990); Synthes, Inc. v.
Knapp, 978 F.Supp.2d 450, 455 (E.D. Pa. 2013). The
rationale for the rule is to promote sound judicial
administration and comity among federal courts.
EEOC, 850 F.2d at 971. It is also designed to
relieve a party who first brings a controversy into a court
of competent jurisdiction from vexation of multiple
litigations covering the same subject matter. QVC, Inc.
v. Patiomats.com, LLC, Civ. No. 12-3168, 2012 WL
3155471, at *3 (E.D. Pa. Aug. 3, 2012).
parties agree that the actions are substantially similar.
They dispute the date the Georgia action was filed for
purposes of applying the first-filed rule. Unlimited argues
that the operative date is the date the action was removed,
which was after this action was filed. Leighton contends it
is the date the action was filed in the Georgia state court.
If Unlimited is correct, the Pennsylvania action is the
first-filed case. On the other hand, if Leighton is correct,
the Georgia case is.
Third Circuit has not decided whether the state court filing
date or the removal date is used to determine when a case is
first filed. District courts within the circuit rely upon the
date of removal. E.g., Schulmerich Bells, LLC v.
Jeffers Handbell Supply, Inc., Civ. No. 17-0275, 2017 WL
697913, at *2 (E.D. Pa. Feb. 21, 2017); Just Born, Inc.
v. Summit Foods Enters., Inc., Civ. No. 13-7313, 2015 WL
996380, at *2 (E.D. Pa. Mar. 6, 2015). District courts
outside this circuit have held that the filing date of the
state court action, not the date of removal, is the operative
date for applying the first-filed rule. E.g.,
Feinstein v. Brown, 304 F.Supp.2d 279, 282-83
(D.R.I. 2004); Affinity Memory & Micro, Inc. v. K
& Q Enters., Inc., 20 F.Supp.2d 948, 954 n.10
(E.D.Va. 1998); Mfrs. Hanover Trust Co. v. Palmer
Corp., 798 F.Supp. 161, 166 (S.D.N.Y. 1992).
case is treated after removal warrants relying on the state
filing date. Mfrs. Hanover Trust, 798 F.Supp. at 166
(citations omitted). Once a case is removed, the federal
court takes it as it is. Williams v. Lampe, 399 F.3d
867, 870 (7th Cir. 2005) (citing First Republic Bank Ft.
Worth v. Norglass, Inc., 958 F.2d 117, 119 (5th Cir.
1992)); Palmisano v. Alliance Health Sys., Inc., 190
F.3d 881, 885 (8th Cir. 1999); Igloo Prods. Corp. v. The
Mounties, Inc., 735 F.Supp. 214, 217 (S.D. Tex. 1990).
The case proceeds “as if it originally had been brought
in the federal court.” 14C Wright & Miller, Fed.
Prac. & Proc. Juris. § 3738. It does not start anew.
The district court gives effect to state court rulings made
prior to removal. D.H. Blair & Co. v.
Gottdiener, 462 F.3d 95, 108 (2d Cir. 2006) (citations
removal petition relates back to the date the state court
action was filed. Repleading is not necessary. The time
within which the removing defendant must answer the complaint
is calculated from the date the initial pleading in state
court was served. See Fed. R. Civ. P. 81(c)(2).
Likewise, the statute of limitations is tolled upon filing
the state court action even if the action was removed after
the limitations period had expired. See Staple v. United
States, 740 F.2d 766, 769-70 (9th Cir. 1984);
Arakaki v. United States, 62 Fed.Cl. 244, 248 (Fed.
Cl. 2004); Morris v. Hoffa, Civ. No. 01-3420, 2002
WL 524037, at *3 (E.D. Pa. Apr. 8, 2002) (citing
Patterson v. Am. Bosch Corp., 914 F.2d 384, 386 (3d
district courts that rely on the date of removal as the
operative date reason that the first-filed rule applies only
to concurrent federal actions and there is no concurrent
federal case until the state court action is removed.
See, e.g., Schulmerich Bells, 2017 WL
697913, at *2; Just Born, Inc., 2015 WL 996380, at
*2. They reason that, until a case is
removed, the first-filed rule is not triggered because there
is only one federal case. In other words, those courts
disregard the state court action. They do not consider the
relation back of the removal petition and that the federal
court takes a removed case as it is from the state court.
courts using the removal date advise that “the
plaintiff in a state civil action can avoid being the
second-filed matter by simply filing a complaint in federal
district court, not a state trial court at the outset.”
Schulmerich Bells, 2017 WL 697913, at *2 (quoting
N. Am. Commc'ns, Inc. v. Homeowners Loan Corp.,
Civ. No. 2006-147, 2007 WL 184776, at *3 n.1 (W.D. Pa. Jan.
22, 2007)). This suggestion supposes that the plaintiff in
the state court action anticipates that the defendant will be
filing a federal action in another district. It ignores the
plaintiff's choice of forum and assumes that a defendant
will always be looking to file its own federal action.
disagree with the reasoning of the courts which fix the
operative date at the time of removal and disregard the date
of the state court filing. The better approach is to relate
the removal date back to the state court filing date. Thus,
we conclude that the state court filing date is the relevant
date for applying the first-filed rule.
action now pending in the Northern District of Georgia is the
first-filed case. This is so even though the district court
in Georgia was not the first federal court to possess
jurisdiction. Thus, for purposes of the first-filed rule, the
Georgia action is the first-filed action because it was filed
in state court before Unlimited filed its lawsuit here.
does not mean this action must be transferred to Georgia. The
first-filed rule is not applied rigidly. EEOC, 850
F.2d at 976. Exceptions, though rare, do exist.They are: (1)
the existence of rare or extraordinary circumstances; (2) the
first-filer engaged in inequitable conduct; (3) he acted in
bad faith; (4) he engaged in forum shopping; (5) the
later-filed action has developed further than the first-filed
action; and (6) the first-filing party instituted suit in one
forum in anticipation of the opposing party's imminent
suit in a less favorable forum. EEOC, 850 F.2d at
argues that we should depart from the first-filed rule
because Leighton engaged in inequitable conduct and forum
shopping, and the Georgia action is an improper anticipatory
one. The circumstances surrounding the attorneys'
discussions and the filing of the Georgia action without
notice shows that filing the Georgia case was a preemptive
cease-and-desist letter advised Leighton that Unlimited
intended to file suit unless its conduct discontinued or its
counsel heard from Leighton's counsel before April 17,
2017. It left the door open to avoid litigation. See One
World Botanicals Ltd. v. Gulf Coast Nutritionals, Inc.,
987 F.Supp. 317, 329 (D.N.J. 1997). Before the deadline came,
Hawkins reached out to Green, giving the impression that
Leighton was willing to engage in settlement discussions.
anticipated filing the Georgia action as early as when he
received the cease-and-desist letter on March
31. Yet, Leighton waited to file suit until
after his Georgia counsel appeared to engage in settlement
discussions. Had Hawkins not contacted Green before April 17,
Unlimited would have concluded that litigation was the only
recourse. By contacting Green, Hawkins gave the impression