Gateway Mortgage Group, L.L.C. v. Lehman Bros. Holdings, Inc.
694 F. App'x 225
| 5th Cir. | 2017Background
- Gateway (Oklahoma mortgage originator) sold mortgages to Lehman Brothers Bank, FSB in 2006; LBHI later held and securitized those loans.
- Many loans defaulted; LBHI filed bankruptcy in 2008 and faced large proofs of claim (notably Fannie Mae).
- LBHI sued Gateway in Texas in 2009; parties settled in 2012 with a release that preserved claims arising from proofs of claim in LBHI’s bankruptcy and included a Harris County forum-selection clause for disputes under the settlement.
- LBHI later sought indemnification from Gateway in LBHI’s Southern District of New York (SDNY) bankruptcy adversary proceedings (initiated 2016 and later severed into many actions).
- Gateway filed a declaratory judgment action in Texas state court (later removed to federal court) seeking to bar or limit LBHI’s indemnification claims; the district court dismissed Gateway’s case without prejudice under the first-to-file rule.
- The Fifth Circuit affirmed, reasoning the SDNY adversary and Gateway’s declaratory action substantially overlap and no compelling circumstance required departing from the first-to-file rule.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether district court erred applying first-to-file rule | Gateway argued its Texas action should proceed despite SDNY adversary | LBHI argued SDNY adversary was first-filed and substantially overlaps | Affirmed dismissal under first-to-file: cases substantially overlap (same core issue: indemnification) |
| Whether forum-selection clause is a "compelling circumstance" displacing first-to-file rule | Gateway contended the 2012 Harris County forum-selection clause required a Texas forum | LBHI argued Gateway can seek transfer or raise clause in the bankruptcy court; clause does not defeat first-to-file dismissal | Court held forum-selection clause is not a compelling circumstance here; dismissal appropriate |
| Whether discretionary Trejo factors favored Gateway proceeding in Texas | Gateway implied equitable factors and forum clause favor hearing its declaratory claim | LBHI argued discretionary factors and overlap favor staying/dismissing the later-filed action | Court found discretionary factors weighed in favor of dismissal (no abuse of discretion) |
| Whether Gateway would be prejudiced by dismissal or inability to vindicate rights in SDNY | Gateway suggested bulk bankruptcy litigation is burdensome and prejudicial | LBHI pointed to procedural remedies in SDNY and possibility to return to Texas if claims unresolved | Court noted Gateway may move for transfer in bankruptcy court and may return to Texas later; no prejudice shown |
Key Cases Cited
- Int’l Fid. Ins. v. Sweet Little Mex. Corp., 665 F.3d 671 (5th Cir. 2011) (standard for first-to-file substantial-overlap analysis)
- Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599 (5th Cir. 1999) (definition and application of first-to-file rule)
- W. Gulf Mar. Ass’n v. ILA Deep Sea Local 24, S. Atl. & Gulf Coast Dist. of the ILA, 751 F.2d 721 (5th Cir. 1985) (factors for evaluating substantial overlap)
- Mann Mfg., Inc. v. Hortex Inc., 439 F.2d 403 (5th Cir. 1971) (first-to-file deference absent compelling circumstances)
- St. Paul Ins. Co. v. Trejo, 39 F.3d 585 (5th Cir. 1994) (discretionary factors for declaratory-judgment venue decisions)