When First Place Is Still Not Good Enough – Understanding The Exceptions To The First-Filed Rule

Saturday, November 16, 2013 - 12:15

The first-filed rule seems simple on its face: when competing lawsuits have been filed in different courts relating to the same controversy, ordinarily the first-filed suit should have priority, and the later-filed suit should be dismissed.[1]  

Recently, our firm represented clients in different litigations on both sides of the first-filed rule, initially obtaining dismissal of a second-filed case in favor of a first-filed case[2] and subsequently a dismissal of a first-filed case with the second-filed case proceeding as the exclusive action.[3] So, how is it that in one instance, a first-filed case takes priority, and in a second, it does not?  The answer lies in examining the circumstances under which the first-filed rule is abrogated.  

The First-Filed Rule

The first-filed rule has been the policy of federal courts for nearly 200 years: "In all cases of concurrent jurisdiction, the court which first has possession of the subject must decide it." [4]   

However, the rule is discretionary,[5] with the first-filed court almost always the court that decides which of the two cases will proceed.[6]  Courts analyzing the first-filed rule avoid a rigid mechanical approach, instead carefully considering the equities of the situation and whether exceptions to the first-filed rule apply.[7]  

The Exceptions To The First-Filed Rule

The Second Circuit has recognized two exceptions to the first-filed rule: (1) where “special circumstances” exist, and (2) where the “balance of convenience” favors the second-filed action.[8]  The “special circumstances” exception applies where the first-filed case was an “anticipatory filing” or the result of forum shopping.[9]

Anticipatory Filing

What constitutes an anticipatory filing is a highly fact-dependent inquiry.[10]  Often, an anticipatory filing takes the form of a declaratory judgment action seeking to invalidate claims articulated in a notice letter from a potential plaintiff threatening litigation.  The Second Circuit has made clear that where a declaratory judgment was “triggered by a notice letter, this equitable consideration may be a factor in the decision to allow the later-filed action to proceed to judgment in the plaintiff’s chosen forum.”[11]   

In the Cassini case, the question of whether our client’s first-filed lawsuit was an anticipatory filing was the main hurdle we had to overcome.  Serta, Inc. (“Serta”) had filed a declaratory judgment in the Northern District of Illinois seeking a determination that sales of certain of its mattresses did not infringe trademarks owned by Oleg Cassini, Inc. (“Cassini”).  A month later, Cassini filed a trademark infringement suit in the Southern District of New York.  We moved to dismiss Cassini’s second-filed action based on the first-filed rule.  Cassini opposed the motion on the ground that Serta’s declaratory judgment action was an anticipatory filing.  What is, and what isn’t, an anticipatory filing was closely examined by the parties and the court.

Much hinged on the court’s interpretation of letters sent by attorneys for Cassini, prior to Serta’s filing of the Illinois action. That is because, “for a declaratory judgment action to be anticipatory, it must be filed in response to a direct threat of litigation that gives specific warnings as to deadlines and subsequent legal action.”[12]  Synthesizing the case law, the court held that “when a notice letter informs a defendant of the intention to file suit, a filing date, and/or specific forum for the filing of the suit, the courts have found, in the exercise of discretion, in favor of the second-filed action."[13]  Similar examples abound in the Second Circuit.[14]  The letters written by Cassini to Serta did not rise to this level of specificity because they included only a general threat of litigation. 

At oral argument, Serta argued that it had to file its declaratory judgment action quickly to protect important business relationships rather than being motived by beating Cassini to the courthouse.  Cassini had sent pre-litigation letters to J.C. Penney, one of Serta’s largest customers, claiming Serta’s mattresses infringed the Cassini mark.  The court agreed that this situation presented “a legitimate reason to file a declaratory judgment action with dispatch, so as to resolve, promptly, a controversy that had come to involve (and expose to the threat of legal action) one of its largest customers.”[15]  Serta was successful in getting the second-filed action dismissed and proceeding in Illinois as its declaratory judgment action was held not to be anticipatory.[16]

The Balance Of Conveniences

Several months later, we were back in the S.D.N.Y., in another trademark case – Sead Pepic, Lifeguard Master, LLC v. The Lifeguard Store, Inc., 12-cv-3171 – this time arguing that the second-filed action should proceed and that the first-filed action must be dismissed.  In Pepic, we were able to obtain a dismissal of the first-filed case arguing that the first-filer had no connection to the S.D.N.Y.  The first-filed rule can be abrogated where the balance of conveniences decidedly tilts to the second-filed action.  The factors applied in this analysis are derived from and identical to the factors considered on a motion to transfer venue under 28 U.S.C. § 1404(a): (1) plaintiff’s choice of forum, (2) convenience of the witnesses, (3) location of relevant documents and ease to sources of proof, (4) convenience of the parties, (5) locus of the operative facts, (6) availability of process to compel the attendance of unwilling witnesses and (7)  relative means of the parties.  Indeed, we opposed plaintiff’s order to show cause by a motion to dismiss and transfer venue under 28 U.S.C. § 1404(a).  The only connections plaintiff had to the S.D.N.Y. were New York-based counsel and plaintiff’s status as a limited liability company formed in New York but whose principal place of business, owner, offices and all operations were in California.  By contrast, our client was an Illinois corporation owned and operated from a business headquarters located in the Northern District of Illinois, the district where the second-filed suit was brought. 

Because there was so little connection to the forum where the first-filed suit was brought in, and a substantial connection to the forum of the second-filed suit, the deference usually accorded plaintiff’s choice of venue was abrogated and the second-filed case proceeded exclusively.

Lessons To Be Drawn

Simply being the first to file does not guarantee your choice of venue. Before filing suit, consider whether your lawsuit bears a reasonable connection to the chosen forum under the balance-of-convenience factors.  Additionally, analyze whether the proposed suit is brought in response to a letter that sets forth specific litigation threats such as date and place of suit.  If so, and the party specifically threatening litigation files a second lawsuit, you could see your first-filed lawsuit dismissed as anticipatory.  In sum, the first to the courthouse only wins if he or she actually belongs there.            

[1] See D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 106 (2d Cir. 2006).  

[2] Oleg Cassini, Inc. v. Serta, Inc., 2012 LEXIS 33875, *5-*6 (S.D.N.Y. 2012).

[3] Sead Pepic, Lifeguard Master, LLC v. The Lifeguard Store, Inc., 12-cv-3171 (S.D.N.Y.).

[4] Smith v. M’lver, 22 U.S. (9 Wheat) 532. 535 (Opinion by Chief Justice Marshall).

[5] Alltrade, Inc. v. Uniweld Products, Inc., 946 F.2d 622, 629 (9th Cir. 1991)(“the most basic aspect of the first to file rule that it is discretionary”).

[6] See MSK Ins., Ltd. v. Emp’rs Reinsurance Corp., 212 F. Supp. 2d 266, 267 (S.D.N.Y. 2002); but cf. Trippe Mfg. Co. v. American Power Conversion Corp., 46 3d 624, 628-29 (7th Cir. 1995)(holding that the court presiding over the first-filed suit can stay its proceeding and allow the court presiding over the second-filed suit to decide which of the two cases will proceed).

[7] See Curtis v. Citibank, N.A., 226 F.3d 133, 138 (2d Cir. 2006).

[8] See Emplrs. Ins. v. Fox Entm't Group, Inc., 522 F.3d 271, 275 (2d Cir. N.Y. 2008).

[9] See Cassini, 2012 U.S. Dist. LEXIS 33875,  *13.

[10] See Schnabel v. Ramsey Quantitative Sys., 322 F. Supp. 2d 505, 511-512 (S.D.N.Y. 2004).

[11] Emplrs. Ins., 522 F. 271, at 276.

[12] Cassini, at *13 (emphasis original)(quoting Employers Ins. Of Wassau, 522 F.3d at 276).

[13] Cassini, at *15 (quoting J. Lyons & Co. v. Republic of Tea, Inc., 892 F. Supp. 486, 491 (S.D.N.Y. 1995)).

[14] See, e.g., AFA Dispensing Grp. B.V. v. Anheuser-Busch, Inc., 740 F. Supp. 2d 465, 470 (S.D.N.Y. 2010) (anticipatory filing found where notice letter stated that defendant "has until 5PM EDT Friday July 16 to unequivocally confirm its commitment to perform under our Agreement or it will face an injunction motion," and where the first claim was filed on the date on which plaintiff intended to petition for relief); CGI Solutions, LLC v. Sailtime Licensing Grp., LLC, No. 05-cv-4120, 2005 U.S. Dist. LEXIS 28878, 2005 WL 3097533, at *3-4 (S.D.N.Y. Nov. 17, 2005) (although notice letter “did not outright announce that it would be filing suit by a particular date,” a notice letter stating that the party “may file a lawsuit seeking injunctive relief and civil damages for breach of contract, conversion, theft of trade secrets, copyright infringement, unfair competition or other causes of action” sufficiently “intimated its resolve to bring a lawsuit” and “sufficiently notified Plaintiffs of its resolve to sue”); Chicago Ins. Co. v. Holzer, No. 00-cv-1062, 2000 U.S. Dist. LEXIS 8327, 2000 WL 777907, at *3 (S.D.N.Y. June 16, 2000) (first-filed suit was an anticipatory filing when the notice letter stated a specific jurisdiction and gave a 48-hour deadline); Mondo, Inc. v. Spitz, No. 97-cv-4822, 1998 U.S. Dist. LEXIS 369, 1998 WL 17744 (S.D.N.Y. Jan. 16, 1998) (first-filed suit was anticipatory when notice letter stated a specific venue). 

[15] Cassini, at *19

[16] Regarding forum shopping, we pointed out at oral argument that, in federal court, in cases dealing with federal law, there isn’t the possibility of “home cooking” as federal courts will uniformly apply these well-developed and set principles of IP law.  


Thomas K. Richards is a litigator who is well-versed in the intricacies of litigation in both the New York and New Jersey state and federal courts, specializing in complex commercial litigation, intellectual property, trade secrets, antitrust, bankruptcy and toxic tort defense work. Mr. Richards has handled TROs and injunctions on behalf of large corporations in connection with the protection of their trademarks. He is currently handling a copyright dispute brought by a Chinese entertainer against a U.S.-based Chinese language newspaper, and he has represented leading software companies, online businesses, and other technology producers in connection with the protection of their intellectual property and trade secrets.

Please email the author at trichards@leaderberkon.com with questions about this article.