First to File Rule and Transferring Venue

In re Nitro Fluids LLC (Fed. Cir. 2020)

  • 2018 — Cameron sued Nitro in S.D. Tex (Houston) where both companies are located.  That case is still pending.
  • 2020 — Cameron separately sued Nitro in W.D. Tex (Waco).  The new action accuses the same Nitro products but asserts different (albeit related) patents.  The patents asserted include overlapping patent-families and inventorship.  Cameron also separately sued “Butch’s Rathole & Anchor Service, Inc.” on the patents in W.D. Tex.

Nitro asked the W.D.Tex court (Judge Albright) to transfer its case to S.D.Tex, but Judge Albright refused.

The courts generally follow a first-to-file presumption for situations like this where there are two different cases filed in two different venues that involve the same parties and substantially overlapping issues.  The presumption is that the cases should both be tried in the same venue, and that venue is the one where the first-case was filed.  Wright & Miller explains:

Although the burden generally is on the moving party to establish that there should be a change of venue, when two courts have concurrent jurisdiction over a dispute involving the same parties and issues, as a general proposition, the forum in which the first-filed action is lodged has priority.

Fed. Prac. & Proc. § 3854 Standard in Considering Transfer—Interest of Justice.  I should also note here that the Federal Circuit repeatedly refers to this as the “first-to-file rule” while I think it is more of a presumption.  Their naming of this as a “rule” foreshadows their conclusion — that it must be followed.

Nitro’s motion to transfer was filed under 28 U.S.C. § 1404.  That statute permits change of venue for convenience and in the interest of justice.  Typically this type of transfer analysis considers a balance of public and private factors: interest of justice; judicial economy; court’s familiarity with the law; local interest in deciding the case; convenience of the parties and witnesses; plaintiff’s forum preference; etc.

Here, Judge Albright walked through the traditional § 1404 factors and concluded that the interest-of-justice weighed in favor of keeping the lawsuit in Waco.  In particular, Judge Albright found that his docket was much lighter and faster than those of the Houston judges, and that there were also other parallel cases in W.D. Tex. involving other defendants that could lead to inconsistent verdicts.

On mandamus, the Federal Circuit has given effect to the first-to-file rule — holding that the full Section 1404 analysis was improper.

[Judge Albright’s] determination rested on the legal proposition that the first-to-file rule is only applicable when the balance of factors favors the first-filed court.

That proposition is contrary to law.

Slip Op. (Internal citations eliminated).

To be clear, the court is not saying that the Section 1404 factors are irrelevant. Rather, as a matter of procedure, the first-to-file rule sticks absent “compelling circumstances” to justify an exception. Those compelling circumstances might come from a traditional Section 1404 factor.

The court justified this departure from the ordinary balancing because the second-filer “is insisting on having two substantially overlapping proceedings continue at the same time before two different courts.”

In its mandamus opinion, the court did not order transfer, but rather vacated the original judgment and demanded that on remand the district court consider whether its justification for keeping the case is “compelling.”

11 thoughts on “First to File Rule and Transferring Venue

  1. 5

    Yet another Fed. Cir. highly critical mandamus decision against the same Waco W.D.TX judge: “In re Apple Inc., 20-135 — Yesterday in an order filed by Chief Judge PROST, a split Federal Circuit granted Apple’s petition for a writ of mandamus. Uniloc sued Apple in the Western District of Texas.”

  2. 4

    Anyone have any thoughts on why Cameron filed their second suit in W.D. Tex instead of S.D. Tex?

    Especially given the patents being related, why risk different negative / positive / split outcomes?

    1. 4.1

      You must have missed the earlier detailed Patently-O bog and various other reports on this and other practices of the new and sole judge in Waco W.D.TX

  3. 3

    com·pel·ling
    /kəmˈpeliNG/
    adjective

    That which promotes victory when competing with other district courts via unsanctioned specialization in particular types of litigation.

    1. 3.1

      you missed a few parts there, Marty:
      – in an objective manner
      – such that the definition is known a priori

      If you are opening up your ‘definition’ to be a competition between districts, then that definition applies to ALL districts, and as you have given, there is NO way for any one district to distinguish itself vis a vis the other districts as districts (you quite evidently need more).

  4. 2

    Define** “compelling.”

    ** in an objective manner such that the definition is known a priori.

  5. 1

    Are there many patent cases that Waco W.D.Tex Judge Albright has NOT refused to transfer from there so far?
    Note the Fed. Cir. comment in this mandamus decision that: “That proposition is contrary to law. Indeed, the very cases relied on by the district court make clear that it had matters backwards:.” [Isn’t that pretty strong language from an appellate court?]
    Also, how valid now was his argument then that he has a lighter docket, in view of the reportedly huge success of his invited filing of new patent suits in Waco?

    1. 1.1

      The fact that S.D. Tex (Houston) is where both companies are located ought to be reason enough for a transfer even on convenience.

      Also, while “the forum in which the first-filed action is lodged has priority” may not be an absolute rule, is not “has priority” more than “a presumption of priority”?

      1. 1.1.1

        Speed and efficiency of proceedings was a key justification for creating a whole new statutory scheme in the form of inter partes reexaminations. That bit seems pretty compelling since it appears that Judge Albright is able to streamline these cases.

        1. 1.1.1.1

          It was noted on another blog that only one of his patent cases have gone to trial so far. Nor have any validity issues been efficiently disposed of on summary judgement that I have heard reported?

    2. 1.2

      Paul,

      The answers to your questions will depend on the answer to my question at post 2 above.

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