Kohn Law Group, Inc. v. Auto Parts Manufacturing Mississippi, Inc.
2015 U.S. App. LEXIS 9310
| 9th Cir. | 2015Background
- APMM contracted Noatex to build a Mississippi plant; Noatex subcontracted King Construction.
- King filed a stop-notice in Mississippi claiming $260,410.15 owed by Noatex; Mississippi courts (and the Fifth Circuit) later found the Stop Notice Statute unconstitutional in related litigation where Kohn Law represented Noatex.
- Noatex granted Kohn Law a contractual lien on its receivables to secure legal fees; Kohn Law sued APMM in the Central District of California under Cal. Com. Code § 9607(a)(3) seeking the disputed funds.
- APMM had earlier filed an interpleader in Mississippi naming Noatex and King; the Mississippi litigation was ongoing and directly concerned the same $260,410.15.
- The Central District of California stayed Kohn Law’s suit under the first-to-file rule (and also invoked Colorado River doctrine as an alternative), prompting Kohn Law’s appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the California action should proceed despite an earlier Mississippi interpleader | Kohn Law: apply a different, stricter framework (claim-preclusion style factors) and permit California suit | APMM: first-to-file rule applies because Mississippi interpleader was filed earlier and involves substantially similar parties and issues | Court: stay was proper under the first-to-file rule; Mississippi action filed first so stay affirmed |
| Whether omission of a party (King Construction) in the second suit defeats first-to-file rule | Kohn Law: omission means parties aren't substantially similar; rule shouldn't apply | APMM: first-to-file does not require exact identity; substantial similarity suffices | Court: omission of King does not defeat the rule; substantial similarity of parties is enough |
| Whether the issues in the two suits are substantially similar | Kohn Law: issues differ because of procedural posture and party composition | APMM: Kohn Law stands in Noatex's shoes; dispute over entitlement to same $260,410.15 overlaps directly | Court: issues substantially overlap; central question (Noatex’s entitlement) is at heart of Mississippi case |
| Whether the court should consider supplemental materials about ongoing Mississippi proceedings on appeal | Kohn Law: asked appellate court to take judicial notice / supplement record | APMM: oppose supplementation; argue facts were not before district court | Court: denied motions; appellate court will not take judicial notice of facts not before district court; no extraordinary circumstances shown |
Key Cases Cited
- Alltrade, Inc. v. Uniweld Prods., Inc., 946 F.2d 622 (9th Cir.) (first-to-file rule promotes efficiency and may bar second-filed suit even if parties differ)
- Pacesetter Sys., Inc. v. Medtronic, Inc., 678 F.2d 93 (9th Cir.) (standard of review for district court stays under first-to-file)
- Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599 (5th Cir.) (first-to-file rule aims to maximize economy, consistency, and comity)
- Save Power Ltd. v. Syntek Fin. Corp., 121 F.3d 947 (5th Cir.) (first-to-file does not require exact identity of parties)
- Harris Cnty. v. CarMax Auto Superstores Inc., 177 F.3d 306 (5th Cir.) (assessing substantial overlap of issues for first-to-file)
- Int’l Fid. Ins. Co. v. Sweet Little Mex. Corp., 665 F.3d 671 (5th Cir.) (issues need only be substantially similar, not identical)
- Noatex Corp. v. King Constr. of Hous., L.L.C., 732 F.3d 479 (5th Cir.) (related Fifth Circuit decision in underlying stop-notice litigation)
- Colo. River Water Conservation Dist. v. United States, 424 U.S. 800 (U.S. Supreme Court) (doctrine permitting stay or abstention where parallel litigation raises considerations of wise judicial administration)