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LLC v. Plum Island Soap Company, LLC

United States District Court, N.D. Alabama, Northeastern Division

August 3, 2018

1818 FARMS, LLC, Plaintiff,



         This case arises out of a trademark dispute between two companies selling men's toiletries creatively packaged inside, what are essentially, large paint cans. On October 11, 2017, 1818 Farms, LLC received a letter from Plum Island Soap Company, LLC alleging that 1818 Farms' use of this type of packaging constituted trademark infringement and threatening legal action if 1818 Farms failed to cease its purportedly infringing behavior. Doc. 8-4 at 2-5. After months of negotiations, during which the parties agreed upon a framework for settlement, 1818 Farms surreptitiously filed this lawsuit challenging the propriety of Plum Island's trademark and seeking a declaration that 1818 Farms' marks and trade dress did not infringe on Plum Island's intellectual property. Doc. 1. After receiving notice of the lawsuit, Plum Island filed a separate merits action the next day in the United States District Court for the District of Massachusetts asserting numerous trademark infringement claims, breach of contract, and assorted state law torts. See Compl., Plum Island Soap Co. v. 1818 Farms LLC, No. 1:18-cv-10214-IT (D. Mass. Feb. 2, 2018), ECF No. 1.

         Plum Island now moves to dismiss or stay this action in favor of its lawsuit in Massachusetts or, in the alternative, to transfer this lawsuit to the District of Massachusetts for consolidation, asserting that 1818 Farms' choice of venue is entitled to no deference because it misled Plum Island for purposes of winning the race to the courthouse. Docs. 3; 4; 5.[1] 1818 Farms has subsequently filed its own motion asking the court to enjoin Plum Island from litigating its duplicative lawsuit in Massachusetts and to defer to its choice of venue under the first-filed rule. Doc. 14. Both motions are now fully briefed, docs. 11; 14-2; 17; 25; 27; 29. Upon careful consideration of the facts and the applicable law, the court finds that the District of Massachusetts is the appropriate venue for 1818 Farms' lawsuit.


         When dealing with substantially similar cases filed in different “federal district courts . . . the general principle is to avoid duplicative litigation.” Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976). Thus, “the fact that a substantially similar action is pending currently in the transferee court counsels in favor of transfer because of the opportunity for consolidation and, thus, the conservation of judicial resources.” Soroka v. Lee Techs. Servs., Inc., No. 1:06-CV-0710-TWT, 2006 WL 1734277, at *4 (N.D.Ga. June 19, 2006). To resolve the question of which court should decide the merits of substantially similar cases, however, courts typically apply “[t]he first-filed rule [which] provides that when parties have instituted competing or parallel litigation in separate courts, the court initially seized of the controversy should hear the case.” Collegiate Licensing Co. v. Am. Cas. Co. of Reading, Pa., 713 F.3d 71, 78 (11th Cir. 2013). Therefore, “[w]here two actions involving overlapping issues and parties are pending in two federal courts, there is a strong presumption across the federal circuits that favors the forum of the first-filed suit.” Manuel v. Convergys Corp., 430 F.3d 1132, 1135 (11th Cir. 2005). Application of the first-filed rule controls not only the merits question, but also determines “which court may decide whether the second filed suit must be dismissed, stayed, or transferred and consolidated.” Collegiate Licensing, 713 F.3d at 78.

         “Exceptions [to this general rule], however, are not rare, and are made when justice or expediency requires, as in any issue of choice of forum.” Genentech, Inc. v. Eli Lilly & Co., 998 F.2d 931, 937 (Fed. Cir. 1993) abrogated on other grounds by Wilton v. Seven Falls Co., 515 U.S. 277, 289 (1995)). Indeed, the “[m]echanical application of the [first-filed] rule could potentially conflict with the rationale underlying it. The inherent fairness in generally giving the first to file the selection of forum diminishes if the purpose of that first filing is simply to preempt the [adversary's] choice of venue.” Barrington Grp., Ltd. v. Genesys Software Sys., Inc., 239 F.Supp.2d 870, 873 (E.D. Wis. 2003). In the Eleventh Circuit, “the party objecting to jurisdiction in the first-filed forum [carries] the burden of proving ‘compelling circumstances' to warrant an exception.” Manuel, 430 F.3d at 1135.

         Among the many factors bearing on the existence of “compelling circumstances” include, “‘whether the . . . action was filed in apparent anticipation of the other pending proceeding, '” and whether the first-filed action was an attempt at “improper forum shopping.” Id. at 1135-36 (quoting Ven-Fuel, Inc. v. Dep't of the Treasury, 673 F.2d 1194, 1195 (1982)); see also Motorola Mobility, Inc. v. Apple, Inc., No. 10-23580-CIV-UU, 2011 WL 13100235, at *5 (S.D. Fla. May 24, 2011) (explaining that compelling circumstances are shown if “the plaintiff engaged in forum shopping or . . . filed the first action in apparent anticipation of the other pending proceeding”). This concern is magnified when considering a “[d]eclaratory judgment action[] brought in the face of clear threats of suit and seeking [a] determination[] that no liability exists . . . if the other party proceeds to file an action alleging an infringement of rights.” Barrington, 239 F.Supp.2d at 873-74; see also Nw. Airlines, Inc. v. Am. Airlines, Inc., 989 F.2d 1002, 1007 (8th Cir. 1993) (finding that an action “for declaratory judgment also merits a closer look, as such an action may be more indicative of a preemptive strike than a suit for damages or equitable relief”).

         The factors outlined in the venue transfer statute, 28 U.S.C. § 1404, may also “justify an exception to the first-filed rule.” Collegiate Licensing, 713 F.3d at 79.[2] These include, “the convenience and availability of witnesses . . . or the possibility of consolidation with related litigation.” Genentech, 998 F.2d at 938; see also Drugstore-Direct, Inc. v. Cartier Div. of Richemont N. Am., Inc., 350 F.Supp.2d 620, 623 (E.D. Pa. 2004) (explaining that “[e]xceptions to the first-filed rule are not rare and are made when justice or expediency require[], including when . . . the balance of convenience favors the second forum”) (quotation omitted).

         II. FACTS

         On October 11, 2017, Plum Island, through counsel, sent a demand letter requesting that 1818 Farms cease using certain trademarks and product packaging that Plum Island believed infringed on its intellectual property. Doc. 8-4 at 2-5. The letter threatened legal action unless 1818 Farms agreed to comply with Plum Island's request by October 27, 2017. Id. at 5. 1818 Farms timely responded to the letter, explaining that, although it disagreed with Plum Island's legal position, it was “interested in resolving this matter amicably and . . . discuss[ing] reasonable measures that could be taken in an effort to address [Plum Island's] concerns regarding alleged trademark infringement.” Doc. 8-5 at 2-3.

         Roughly a month later, Plum Island responded by sending a second demand letter refuting the legal points raised by 1818 Farms. Docs. 8-6 at 2; 8-7 at 2-5. Plum Island's second letter also included an offer of settlement to remain open until December 8. Doc. 8-7 at 5. Prior to the expiration of this deadline, the parties began negotiating a settlement in earnest, with both sides indicating their interest in reaching an amicable resolution of their dispute. Docs. 8-1 at 6-7; 29-1 at 3-4. Indeed, 1818 Farms sent an email containing a number of alternate packaging designs to Plum Island in the hopes of assuaging any infringement concerns. Doc. 29-1 at 3-4; 29-3 at 34. Plum Island followed these discussions with a third letter, providing a response deadline of December 29 and outlining a framework for settlement consisting of six major terms, including a lump sum payment of $15, 000 to Plum Island, and a permanent injunction against 1818 Farms' use of allegedly infringing marks. Doc. 8-8 at 2-3. At 1818 Farms' request, Plum Island extended the response deadline to January 5, doc. 29-1 at 4, and again 1818 Farms indicated its desire to settle. Specifically, while 1818 Farms rejected Plum Island's terms and explained that it did not consider itself bound until the signing of a formal settlement agreement, it also expressly stated “that a settlement along the lines proposed . . . is possible” given certain caveats. Doc. 8-9 at 3-4. In particular, 1818 Farms took issue with the amount of money demanded by Plum Island, proposing instead a $5, 000 lump-sum payment, and noting that other more minor aspects of the settlement remained subject to further clarification. Id.

         On January 17, 2018, Plum Island rejected the proposed $5, 000 payment and threatened to sue if 1818 Farms declined to meet its demand for $15, 000. Doc. 29-4 at 9. Two days later, the parties held a conference call, where it is undisputed that 1818 Farms agreed to pay the full $15, 000 requested by Plum Island and otherwise agreed to the framework for settlement laid out in its prior letter of January 5, 2018. See Doc. 25-1 at 5-6. After the call, Plum Island believed that the parties had agreed to mutually acceptable settlement terms, including 1818 Farms' acquiescence to a permanent injunction blocking its use of potentially infringing trademarks or other designations, so long as that injunction was appropriately limited and did not involve court action-an understanding Plum Island communicated to 1818 Farms without any objections. See Id. at 6, 17-18; Doc. 8-9 at 3-4.

         Consistent with its belief that the parties had reached a settlement, counsel for Plum Island emailed to 1818 Farms a hard copy of the proposed settlement agreement, which included a consent judgment for a permanent injunction. Docs. 25-1 at 20; 29-1 at 6-7; 29-4 at 14. The next day, counsel for 1818 Farms acknowledged receipt of the agreement, and indicated that he would send his edits shortly after a meeting he had scheduled for later that afternoon. Doc. 8-6 at 7. Roughly two days later, on January 25, Plum Island inquired about the edits and, at 5:26 p.m., 1818 Farms emailed a redline of the draft agreement to Plum Island indicating its opposition to the included consent judgment. Docs. 8-6 at 7; 29-4 at 33. The email also provided that counsel for 1818 Farms looked forward to further communication and was available for discussion. Doc. 29-4 at 33.

         The next morning, at 10:30 a.m., without waiting for Plum Island's response to its proposed revisions, 1818 Farms filed this action for declaratory relief. See Doc. 1 at 1. Later that same day, Plum Island responded to 1818 Farms' draft with its own redline, noting that it was agreeable to virtually all of 1818 Farms' suggestions. Doc. 29-4 at 53. Plum Island also explained that, while the consent judgment was, from its perspective, a necessary part of the settlement, it was amenable to offering additional ...

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