Case Information
*1 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION
BEDROCK LOGISTICS, LLC, §
§
Plaintiff, §
§
§ Civil Action No. 3:16-cv-2815-M §
BRAINTREE LABORATORIES, INC. §
and AFFORDABLE §
PHARMACEUTICALS, LLC, §
§
Defendants. §
MEMORANDUM OPINION AND ORDER
Before the Court is Defendants’ Motion to Dismiss or Transfer Venue (ECF No. 6). For the reasons stated below, the Motion is GRANTED .
I. Procedural and Factual Background
On September 15, 2016, Braintree Laboratories, Inc. and its subsidiary Affordable Pharmaceuticals (collectively “Braintree”) sent a demand letter to Bedrock Logistics, LLC,
asserting that Bedrock had engaged in a deceptive kickback scheme to obtain and maintain
business with Braintree. Braintree’s letter included an offer of settlement to avoid litigation, with
a response deadline of September 26, 2016. On September 19, 2016, instead of settling or
otherwise responding, Bedrock filed suit in Texas state court, seeking collection of its invoices
owed by Braintree. On September 27, 2016, Braintree filed suit against Bedrock in federal court
in Massachusetts. On October 4, 2016, Braintree removed the Texas state court action to this
Court. Bedrock then moved to transfer the Massachusetts action to this Court pursuant to 28
U.S.C. § 1404(a). The Massachusetts federal court denied that motion, holding that the § 1404(a)
factors weighed against transfer to Texas, and rejecting Bedrock’s first-to-file argument.
Braintree Labs., Inc. v. Bedrock Logistics, LLC , 16-11936-IT, 2016 WL 7173755 (D. Mass. Dec.
8, 2016). The parties will thus continue to litigate a case in Massachusetts involving the same
transactions and witnesses at issue here. On November 8, 2016, Braintree moved to dismiss this
case for lack of personal jurisdiction, or, in the alternative, to transfer this action to the District of
Massachusetts (ECF No. 6). Bedrock argues that venue is proper here, and that the first-to-file
rule prevents transfer to the District of Massachusetts.
II. Legal Standard
A. Venue Transfer
A district court may transfer a civil action to any other district or division where it might have been brought. 28 U.S.C. § 1404(a). In the Fifth Circuit, a district court is to grant transfer if
the party seeking a change of venue has demonstrated that the transferee venue “is clearly more
convenient” than the plaintiff’s chosen venue. In re Volkswagen of Am., Inc. , ( Volkswagen II )
545 F.3d 304, 311 (5th Cir. 2008) (en banc). A court must consider a number of private and
public interest factors when analyzing a motion to transfer venue. The private interest factors
include: “(1) the relative ease of access to sources of proof; (2) the availability of compulsory
process to secure the attendance of witnesses; (3) the cost of attendance for willing witnesses;
and (4) all other practical problems that make trial of a case easy, expeditious and
inexpensive.” In re Volkswagen AG , ( Volkswagen I ) 371 F.3d 201, 203 (5th Cir. 2004). The
public interest factors include: (1) the administrative difficulties flowing from court congestion;
(2) the local interest in having localized interests decided at home; (3) the familiarity of the
forum with the law that will govern the case; and (4) the avoidance of unnecessary problems
regarding conflict of laws or the application of foreign law. Id. A plaintiff’s choice of venue is
not a distinct factor in the § 1404(a) analysis, but “when the transferee venue is not clearly more
convenient than the venue chosen by the plaintiff, the plaintiff’s choice should be
respected.” Volkswagen II , 545 F.3d at 311. The parties do not dispute that the suit could have
been filed in the District of Massachusetts. Thus, the Court must determine whether, in the
interests of justice, the private and public interest factors support a transfer to the District of
Massachusetts.
B. First-to-file Rule
The first-to-file rule provides that when related cases are pending in two district courts, the court with the later-filed action can refuse to hear the case, if the issues raised by both cases
“substantially overlap.” Cadle Co. v. Whataburger of Alice, Inc. , 174 F.3d 599, 603 (5th Cir.
1999). The first-to-file rule is a discretionary doctrine, the aim of which is to “avoid the waste of
duplication, to avoid rulings which may trench upon the authority of sister courts, and to avoid
piecemeal resolution of issues that call for a uniform result.” Save Power Ltd. v. Syntek Fin.
Corp. , 121 F.3d 947, 950 (5th Cir. 1997). However, courts may choose not to apply the first-to-
file rule when compelling circumstances exist. Mann Mfg., Inc. v. Hortex, Inc. , 439 F.2d 403,
407 (5th Cir. 1971).
Compelling circumstances exist when the first action was an anticipatory suit, meaning it was designed to preempt the second filer’s suit and to secure the first filer’s forum choice. See
Raz Imports, Inc. v. Luminara Worldwide, LLC , No. 3:15-CV-02223-M, 2015 WL 6692107, at
*3 (N.D. Tex. Nov. 3, 2015) (Lynn, J.). Anticipatory suits “deprive a potential plaintiff of his
choice of forum, and are also one of the compelling circumstances courts cite when declining to
apply the first-filed rule.” Paragon , 2008 WL 3890495, at *4. In these cases, deferring to the
plaintiff’s choice of forum incentivizes and rewards the winner of a race to the
*4 courthouse. Id. Courts thus disfavor anticipatory suits as constituting improper forum-
shopping. See Mission Ins. Co. v. Puritan Fashions Corp. , 706 F.2d 599, 602 n.3 (5th Cir. 1983).
III. Analysis
A court typically decides personal jurisdiction questions before considering any venue challenges. However, if there is a sound prudential justification for doing so, a court may reverse
the normal order. See Leroy v. Great W. United Corp. , 443 U.S. 173, 180 (1979) (explaining that
“neither personal jurisdiction nor venue is fundamentally preliminary”). Here, “resolution of the
venue issue renders the personal jurisdiction problem moot and avoids the need to address
constitutional questions. It is thus appropriate to consider venue as an initial matter.” Nuttall v.
Juarez , 984 F. Supp. 2d 637, 642 (N.D. Tex. 2013) (Lynn, J.).
A. Venue Transfer
Private Interest Factors
i. Relative Ease of Access to Sources of Proof Due to increasing technological advances, access to some types of proof presents a lesser inconvenience than it once did; however, the fact that technology reduces the inconvenience does
not render this factor superfluous. Volkswagen II , 545 F.3d at 315. Braintree argues documentary
evidence relevant to the alleged kickback scheme is located primarily in Massachusetts. Bedrock
argues all of its evidence is located in Dallas and would have to be transported to Massachusetts.
However, neither party describes specific documents that will be more accessible if the case is
tried in Texas instead of Massachusetts, or vice versa. Considering the lack of specificity, this
factor is neutral.
ii. Availability of Compulsory Process to Secure the Attendance of Witnesses A party seeking transfer must “identify the key witnesses and general content of their testimony.” Sargent v. Sun Trust Bank, N.A. , No. Civ. 3:03-CV-2701, 2004 WL 1630081, at *3
(N.D. Tex. July 20, 2004). When a greater number of key non-party witnesses could be
subpoenaed to attend a trial in the potential transferee forum, but not in the current forum, this
factor favors transfer. Internet Mach. LLC v. Alienware Corp. , No. 6:10-CV-023, 2011 WL
2292961, at *6 (E.D. Tex. June 7, 2011). A district court may subpoena a non-party witness if he
or she lives within the district or “within 100 miles of the place specified for the deposition,
hearing, trial . . . ” Fed. R. Civ. P. 45(c). Convenience of witnesses is the most important factor
in considering transfer, and the “convenience of the non-party witnesses is accorded the greatest
weight.” Minka Lighting, Inc. v. Trans Globe Imports, Inc. , No. 3:02-CV-2538, 2003 WL
21251684, at *2 (N.D. Tex. May 23, 2003).
Braintree is a Massachusetts corporation with its principal place of business in Massachusetts, and Affordable Pharmaceuticals is a Massachusetts limited liability company
with its principal place of business in Massachusetts. Bedrock is a Texas limited liability
company with its principal place of business in Texas. Braintree notes that the Court does not
possess compulsory process over several key non-party witnesses who either conduct business in
or live in Massachusetts, and may not voluntarily appear to testify at trial. They are Henry
Villalobos, a former Braintree employee who allegedly received illegal kickbacks, Jim Sears,
Bedrock’s agent who allegedly paid the kickbacks, and Chuck McCabe, who was Bedrock’s
President when the parties’ relationship was initiated, and who Braintree alleges may have
known about the alleged kickback scheme. These three witnesses would likely be unwilling to
testify about matters that are potentially significant, absent compulsory process, particularly
because they are all alleged to be implicated in the claimed wrongdoing. Their potential
unavailability in Texas weighs in favor of transfer to Massachusetts. See NDC Inv. LLC v.
Lehman Bros. , No. 3:05-CV-2036-D, 2006 WL 2051030, at *3 (N.D. Tex. July 21, 2006).
Bedrock makes general assertions that it would need some of its employees located in Dallas to testify, and seems to suggest they would not voluntarily do so, but in contrast to what
Braintree presented, Bedrock does not specifically identify the name or location of any key
witnesses, nor the subject of the testimony Bedrock would seek to obtain through compulsory
process in Texas that would be unavailable for testimony in Massachusetts. None of the evidence
or arguments presented by the parties indicates that any key witnesses are located in Texas.
Therefore, this factor weighs strongly in favor of transfer.
iii. Cost of Attendance for Willing Witnesses
The convenience of witnesses who are employees of the party seeking transfer is entitled to less weight, because that party can compel its employees’ testimony at trial. Comcast Cable
Commc’ns, LLC v. British Telecomm. PLC , No. 3:12-CV-1712-M, 2012 WL 6625359, at *4
(N.D. Tex. Dec. 20, 2012) (Lynn, J.). Braintree argues it would be unduly costly and
burdensome to require its Massachusetts-based employees to travel to Texas to testify about
events that occurred in Massachusetts. Bedrock counters that it would be even less convenient
for its Texas employees to travel to Massachusetts. However, neither party makes a comparative
analysis of the costs any particular employee would incur if the Court transferred this case to
Massachusetts, nor does Bedrock identify any such employees. The action pending in the District
of Massachusetts presumably involves the same witnesses as this case. If the Court denied
transfer, both parties’ witnesses would incur travel-related costs and inconvenience traveling to
the other forum, rather than only one party’s witnesses traveling for what will presumably be one
trial. Therefore, this factor weighs slightly in favor of transfer.
iv. Other Practical Problems
The fourth private interest factor is a catch-all consideration that includes other issues that relate to whether a trial is easy, expeditious, and inexpensive. The existence of multiple
lawsuits on the same issues is a significant issue in evaluating whether a transfer is in the interest
of justice. In re Volkswagen of Am., Inc. , 566 F.3d 1349, 1351 (Fed. Cir. 2009) (applying the
Fifth Circuit’s venue test). The Massachusetts court appears further along in the litigation, as it
has ruled on a motion to transfer and entered a Protective Order, and Bedrock has filed a Third
Party Complaint against Henry Villalobos and James Sears, both of whom have made an
appearance. [1] Because the district court in Massachusetts denied Bedrock’s motion to transfer that
action to this Court, denying Braintree’s Motion to Transfer in this case would result in added
effort and expense. Thus, this factor weighs in favor of transfer.
Public Interest Factors
i. Administrative Difficulties Flowing From Court Congestion The first public interest factor evaluates comparative administrative difficulties due to court congestion in the potential venues. The Northern District of Texas has one third of its
active judgeships vacant, including two in the Dallas Division. Conversely, there is only one
judicial vacancy in the District of Massachusetts. The vacancies in the Northern District of Texas
have the potential to interfere with the expeditious and inexpensive disposition of the case, due to
delay associated with judicial caseloads. See GI Sportz, Inc. v. APX Gear, LLC , No. 3:16-CV-
*8 2020-D, 2016 WL 6650895, at *6 (N.D. Tex. Nov. 8, 2016). Thus, the first public interest factor
weighs slightly in favor of transfer.
ii. Local Interest in Having Localized Interests Decided at Home This factor “generally favors the venue where the acts giving rise to the lawsuit occurred.” Metromedia Steakhouses Co. v. BMJ Foods P.R., Inc. , 3:07-CV-2042-D, 2008 WL
794533, at *3 (N.D. Tex. Mar. 26, 2008). The local interest in deciding local issues at home
favors transfer to a venue that will vindicate such an interest. See Piper Aircraft Co. v. Reyno ,
454 U.S. 235, 241 n.6 (1981).
Braintree Laboratories, Inc. and Affordable Pharmaceuticals both have their principal places of business in Massachusetts. Although Bedrock is a Texas limited liability company with
its principal place of business in Texas, it allegedly participated in a kickback scheme in
Massachusetts, where Braintree Laboratories is incorporated. The services invoiced by Bedrock
to Braintree involved picking up and shipping Braintree’s products from Massachusetts. In
addition, the products involved in the alleged kickback scheme are both manufactured and
warehoused in Massachusetts. The only Texas connection with respect to the kickback scheme is
that Bedrock sent invoices from its Texas location, to which Braintree allegedly remitted
payment.
As the District of Massachusetts noted, “Massachusetts’ interest in adjudicating deceptive practices suits involving Massachusetts companies is at least tantamount to, and arguably greater
than, Texas’ interest in adjudicating contract disputes involving Texas companies.” Braintree
Labs ., 16-11936-IT, 2016 WL 7173755, at *4 (D. Mass. Dec. 8, 2016). While the residents of the
Northern District of Texas may have an interest in unpaid invoices of companies doing business
in the district, Massachusetts residents have a greater interest in the resolution of a potential
illegal kickback scheme that occurred in Massachusetts under the state’s unfair competition
statute. Massachusetts has a greater interest in the outcome of this litigation than Texas, and the
second public interest factor thus favors transfer.
iii. Familiarity of the Forum with the Law that Will Govern the Case The third public interest factor addresses the familiarity of the forum with the law that will govern the case. In the District of Massachusetts, Braintree has asserted unfair competition
claims against Bedrock under Massachusetts law. [2] Although the unfair competition claims will
be adjudicated in Massachusetts regardless of this Court’s venue decision, Massachusetts law
forms the basis of Braintree’s defense to Bedrock’s unpaid invoice claims in this case. However,
Texas law presumably forms the basis of Bedrock’s claim. The third public interest factor is
neutral.
iv. Avoiding Conflicts of Law The fourth public interest factor considers the avoidance of unnecessary problems of conflicts of law or the application of foreign law. The parties do not address whether any
conflicts of law are present. Both federal district courts are of equal jurisdiction, and the
proceedings will be conducted under the Federal Rules of Civil Procedure. Regardless of venue,
the relevant laws in this case are the Massachusetts unfair competition statute and Texas
principles of contract law. Thus, the fourth public interest factor is neutral.
B. First-to-file Rule
Bedrock contends that the first-to-file rule makes transfer improper, because it filed its lawsuit in Texas state court before Braintree filed its suit in the District of Massachusetts.
Braintree responds that the first-to-file rule is inapplicable here because Bedrock’s suit was
*10 anticipatory, and that because the motion to transfer the Massachusetts action to this Court was
denied, this Court’s application of the first-to-file rule would result in duplicative litigation.
The parties do not dispute that there is substantial overlap between this case and the Massachusetts case. As the Massachusetts district court found in rejecting application of the first-
to-file rule to that case, Bedrock appeared to forum shop, participating “in the procedural fencing
that militates against application of the [first-to-file rule] in a race to the courthouse scenario.”
Braintree Labs ., 16-11936-IT, 2016 WL 7173755, at *2 (D. Mass. Dec. 8, 2016). The Court
finds this rationale persuasive.
Courts often make an exception to the first-to-file rule when a plaintiff files an anticipatory suit. Paragon , 2008 WL 3890495, at *4. In determining whether a suit is
anticipatory, courts scrutinize the parties’ activities prior to the filing of a suit. In Paragon , the
court found that based on pre-litigation communications that alerted the plaintiff to the
possibility of a suit, the plaintiff filed suit before the expiration of its deadline to respond to the
other party’s demand. Id. at *5. The relevant facts of this case are virtually identical to those in
Paragon . Here, Braintree’s September 15, 2016, demand letter gave Bedrock eleven days to
consider its settlement offer. During the eleven days, Bedrock filed suit against Braintree in
_________________________________ BARBARA M. G. LYNN CHIEF JUDGE Texas state court, seeking recovery based on the same transactions referenced in Braintree’s
demand. Because the Court finds Bedrock filed an anticipatory action, intended to preempt
Braintree from initiating the first lawsuit, as a way to forum shop, the Court declines to apply the
first-to-file rule. [3]
IV. Conclusion
Because five of the § 1404(a) factors favor transfer and none weigh against transfer, and because the first-to-file rule does not apply here, Braintree has shown the District of
Massachusetts is clearly a more convenient venue than this Court, and Defendants’ Motion to
Transfer Venue is GRANTED . The clerk of court shall promptly transfer this case to the United
States District Court for the District of Massachusetts, for possible consolidation with Braintree
Laboratories, Inc. et al. v. Bedrock Logistics, LLC , civil action number 16-CV-11936-IT.
SO ORDERED .
April 28, 2017.
[1] Braintree Labs. Inc. et al. v. Bedrock Logistics, LLC , 16-cv-11936-IT, Dkt. Entry Nos. 50-57.
[2] Mass. Gen. Laws Ch. 93A (2015).
[3] Bedrock cites cases that involve a determination of which federal court obtained jurisdiction first. See Cadle Co. , 174 F.3d at 603. In this case, the first federal court to obtain jurisdiction was the District of Massachusetts on September 27, 2016. Braintree did not remove the Texas action to this Court until October 4, 2016. In denying transfer, the Massachusetts district court noted that using a state court filing date to determine application of the first-to-file rule could require a federal court that obtains jurisdiction by removal of an older state court action to make the § 1404(a) determination long after another federal court has obtained jurisdiction over a substantially similar federal case. Braintree Laboratories , 2016 WL 7173755, at *2. This Court agrees.