United States District Court, E.D. Pennsylvania
CARL MONZO, individually and on behalf of CROWDRX, INC. Plaintiffs,
ANDREW BAZOS, M.D. Defendant.
Austin McHugh United States District Judge
case arises out of a dispute over a business partnership that
fell apart shortly after it began, leading to a fight over
the pieces. Both parties initiated litigation in Pennsylvania
state court, and then seemingly reached an agreement
resolving the matter in the form of a memorandum of
understanding. A dispute quickly broke out as to whether the
agreement was self-executing. This led one partner to amend
his complaint in his state case, and the other partner to
file a separate action in federal court in New York, which
included trademark claims based upon rights allegedly
conferred by the parties' agreement. The first partner
promptly amended his state court action again to assert
trademark claims there as well, and the case was then removed
to this Court. With litigation now pending in two federal
district courts-here and in the Southern District of New
York-I have before me a motion to dismiss, stay, or transfer
this case to New York under the “first-filed
rule” and 28 U.S.C. § 1404(a), and to dismiss on
several related grounds. For practical purposes, the
controlling issue is whether the date an action was commenced
in state court is properly considered in determining which
action was first-filed, as opposed to a rule that only
federal filings count. Because I am persuaded that state
filings should be considered, and because these cases arise
from an integrated dispute, I will deny the motion in its
Background: The Disagreement and Litigation
Carl Monzo, a Pennsylvanian, and Defendant Andrew Bazos, a
resident of Connecticut, both run businesses that provide
medical services for professional sporting events, music
festivals, and other large events. Monzo's businesses are
Pennsylvania-based while Bazos's operate in the New York
City region. In 2015, the two entered a Shareholders'
Agreement to merge their respective medical services
businesses to form “CrowdRx, Inc., a Pennsylvania
Corporation” [hereinafter “CrowdRx-Pa”].
Under the agreement, Monzo and Bazos wholly owned the
corporation in equal shares.
partnership soon faltered, and by early 2016 Monzo and Bazos
had filed complaints against each other in Pennsylvania state
court-the Delaware County Court of Common Pleas- asserting
various state and common law claims based on their
Shareholders' Agreement and seeking emergency injunctive
relief. Monzo's allegations included that Bazos
“failed to forward revenues generated by New York
events [Bazos] controlled to [CrowdRx-Pa], ” removed
information related to Monzo from the CrowdRx-Pa website, and
locked Monzo out of the company's Google Docs account.
See Pl.'s Compl. ¶¶ 15, 28-30,
Monzo v. Bazos, No. 16-3179 (Del. Cnty. Ct. Comm.
Pl. 2016). To resolve Monzo's emergency motion, the
parties stipulated on May 10, 2016 “not to unilaterally
change the content of the website” or to access the
Google Docs account unless the parties agreed in advance by
email. Stip. 55, ECF No. 6-2.
November 10, 2016, with both state cases still pending, Monzo
and Bazos signed a Memorandum of Understanding (MOU) setting
out a division of CrowdRx-Pa's assets and clients
“as of the Effective Date”-a phrase that has
turned out to be crucial. See Id. at 58. If and when
the MOU went into effect, Bazos would own the CrowdRx
trademark, website, and exclusive rights to several clients,
including Mysteryland and Electric Zoo (two music festivals).
Monzo, in turn, would have exclusive rights to his own roster
of clients but would no longer own CrowdRx-Pa.
proceeded as though the MOU had already taken effect. In
December 2016, he blocked Monzo and his employees from
accessing the CrowdRx-Pa email server and removed all mention
of Monzo from its website. In response, Monzo filed an
Amended Complaint in his Delaware County case, again seeking
emergency relief. He alleged that Bazos's actions
violated the Shareholders' Agreement, the Stipulation,
the MOU, and common law duties. Two weeks later, Bazos filed
in the Southern District of New York (“S.D.N.Y.”)
alleging trademark and unfair competition claims under
federal and New York laws. S.D.N.Y. Compl., ECF No. 6-1.
Monzo later amended his complaint in the Delaware County case
(the “Second Amended Complaint”) to include his
own trademark claims and to seek declaratory judgment and
indemnification. Most recently, after filing his own case
in New York, Bazos removed Monzo's Delaware County case
to this Court.
over the meaning of at least two paragraphs in the
MOU-“Termination of Relationship” and
“Definitive Documents”-forms the central dispute in
this and the S.D.N.Y case. Monzo asserts that the MOU was not
self-executing because it would take effect only if and when
the definitive documents were signed, which they were not.
Bazos argues that the MOU was self-executing such that
CrowdRx-Pa had already “ceased operationally and
financially” and that he owned the trademark.
Bazos moves to dismiss, stay, or transfer this case to the
S.D.N.Y. based on the first-filed rule, which holds
that, when two cases are pending in federal courts, the
first-filed case should generally be the one to proceed.
Alternatively, Bazos seeks a transfer under 28 U.S.C. Section
1404(a). He also seeks dismissal on several other grounds,
many of them contingent on the assertion that CrowdRx-Pa no
• under Federal Rule of Civil Procedure 12(b)(7) for
failure to join an indispensable party (CrowdRx-NY) pursuant
to Rule 19;
• under Rule 12(b)(6) for failure to state a claim;
• under Rule 12(e) for lack of factual specificity;
• under 28 U.S.C. § 2201 for failure to state a
claim for declaratory judgment;
• under Rule 23.1 for failure to state a claim for a
• under 28 U.S.C. § 1406(a) for improper venue.
parties' briefing focuses primarily on the first-filed
rule and I will do the same.
Bazos's Motion to Transfer/Stay/Dismiss under the
first-filed rule holds that “[i]n all cases of federal
concurrent jurisdiction, the court which first has possession
of the subject must decide it.” E.E.O.C. v. Univ.
of Pa., 850 F.2d 969, 971 (3d Cir. 1988),
aff'd, 493 U.S. 182 (1990) (quoting Crosley
Corp. v. Hazeltine Corp., 122 F.2d 925, 929 (3d Cir.
1941)). The rule “encourages sound judicial
administration and promotes comity among federal courts of
equal rank” by giving courts discretion to enjoin a
later-filed case if it “involve[s] the same parties and
the same issues already before another district court.”
Id. at 971. The first-filed rule thus aids in the
“prompt and efficient administration of justice”
and avoids the economic waste and risk of conflicting
judgments inherent in duplicative litigation.
Crosley, 122 F.2d at 930; see also
E.E.O.C., 850 F.2d at 971 (explaining that “the
letter and spirit of the first-filed rule . . . are grounded
in equitable principles” and its “primary purpose
is to avoid burdening the federal judiciary and . . . the
judicial embarrassment of conflicting judgments.”).
court determines that the first-filed rule applies to a pair
of cases, “there is a presumption that the later-filed
action should be dismissed, transferred, or stayed.”
Landau v. Viridian Energy PA, No. CV 16-2383, 2017
WL 1232313, at *3 (E.D. Pa. Apr. 3, 2017) (citing Koresko
v. Nationwide Life Ins. Co., 403 F.Supp.2d 394, 403
(E.D. Pa. 2005)). But a judge's authority to enjoin a
second-filed case “is not a mandate directing wooden
application of the rule.” E.E.O.C., 850 F.2d
at 972. Rather, it is a flexible standard motivated by
equitable principles and practical
considerations-“[d]istrict courts have always had
discretion to retain jurisdiction given appropriate
circumstances justifying departure from the first-filed
rule.” Id. Courts in this Circuit have
recognized several such exceptions, including when the
second-filed action has developed further than the first, and
when there is evidence of anticipatory filing, improper forum
shopping, gamesmanship, or other bad faith by the first
filer. Id. at 976-77.
scope of the first-filed rule-exactly how related
the cases must be for the rule to apply-has mostly developed
in the district courts, without a definitive ruling from the
Third Circuit. As I recently discussed in Landau,
two interpretations have emerged:
Some courts take a narrow view of the first-filed rule and
apply it only when the parties and claims in the later-filed
suit are a ‘mirror image' of the first. Others have
embraced a broader, close-enough-for-government-work approach
to the rule and applied it to ‘disputes involving
similar, concurrent actions.' According to proponents of
the broader approach, the ‘substantive touchstone ...