United States District Court, E.D. Missouri, Eastern Division
MEMORANDUM AND ORDER
D. NOCE, UNITED STATES MAGISTRATE JUDGE
action is before the Court on the motion of defendants
Resource Converting, LLC, Tim Danley, and Rick Kersey
(“the RC defendants”) to stay this action pending
resolution of trial in the United States District Court for
the Southern District of Iowa. (Docs. 229, 230). All parties
have consented to the exercise of plenary authority by the
undersigned United States Magistrate Judge under 28 U.S.C.
Tom Dunne, Jr., alleges the following facts in his
complaint. In May 2015, defendant Gary Brinkmann
contacted plaintiff to sell him certain license agreements.
(Doc. 1 at 4). These agreements would authorize and obligate
plaintiff to acquire for resale “PAD systems”
developed by defendants Resource Converting, LLC; Sebright
Products, Inc.; and JWR, Inc., and sold by defendant NewWay
Global Energy, LLC. (Id. at 5). The PAD systems are
devices that would purportedly convert municipal solid waste
into renewable fuels. (Id. at 4). The systems were
advertised to plaintiff as “using proven and tested
technology to create a homogenous dried fuel stock that can
be converted into different forms of energy.”
(Id. at 5). Defendant Jerry Flickinger gave
plaintiff a “budgetary quote for a single line
processing system to take municipal solid waste and prepare
it for conversion to fuel, ” stating a single system
was “capable of processing 250 tons per day.”
(Id. at 5). Brinkmann and Flickinger allegedly
assured plaintiff repeatedly of the PAD systems' proven
function and the substantial value of the license agreements.
alleges that defendants Brinkmann, Flickinger, Danley, and
Kersey solicited payment from him for the PAD systems and
license agreements, and that they employed high-pressure
sales pitches. (Id. at 6). As a result of
defendants' assurances and representations, plaintiff
entered into license agreements with Resource Converting in
August 2015 and made an initial payment of $400, 000 with an
additional payment of $600, 000 to be made in November 2015.
(Id.) Between May and October 2015, plaintiff and
defendants met with many individuals in Missouri to solicit
the sale and purchase of the PAD Systems. (Doc. 77, Ex. A at
2-3). Between August and November 2015, plaintiff insisted on
seeing a demonstration of an operational PAD system. (Doc. 1
at 6). Brinkmann, Kersey, and Flickinger showed plaintiff a
partially assembled piece of non-functioning equipment in a
building located in Iowa, stating that it had previously been
in operation but was being prepared for relocation.
(Id.) Defendants were never able to show plaintiff a
working PAD system. (Id. at 7). On December 1, 2015,
defendants demanded full payment of the remaining $600, 000
due from plaintiff. (Id.) In June 2016, defendant
Brinkmann stated to plaintiff that the PAD Systems never
functioned as promised. (Id. at 8).
20, 2016, counsel for plaintiff submitted a demand letter to
Brinkmann, Resource Converting, Sebright, JWR, NewWay,
Kersey, and Danley, demanding return of the $400, 000 paid by
plaintiff and threatening legal action if the sum was not
repaid by June 30, 2016. (Doc. 77, Ex. E). Resource
Converting filed a breach of contract claim against Dunne on
June 30, 2016 in Iowa state court. (Id. at Ex. F).
On August 19, 2016, Dunne removed that case to the United
States District Court for the Southern District of Iowa
(“the Iowa case”) and also commenced the instant
action in this District Court (“the Missouri
case”). Defendants moved to transfer the Missouri case
from this Court to the United States District Court for the
Southern District of Iowa on October 17, 2016. (Doc. 55).
This Court denied the motion to transfer on December 6, 2016.
Court previously denied defendants' motion to transfer,
because “[t]he convenience of the parties, witnesses,
and the interest of justice weigh in favor of keeping this
case in this district, where plaintiff commenced it.”
(Doc. 97 at 3). Similar considerations are at stake regarding
defendants' motion to stay.
have repeatedly characterized plaintiff's suit as
“retaliatory.” See, e.g., Doc. 55 at 1,
Doc. 56 at 1, Doc. 230 at 1, Doc. 238 at 1. Defendants argue
that their suit should take priority under the first-filed
rule, and that plaintiff's suit “is merely a
vehicle by which plaintiff can avoid the venue provision of
the License Agreement” and defendants' $600, 000
breach-of-contract claim.” (Doc. 56 at 2).
well-established rule is that in cases of concurrent
jurisdiction, ‘the first court in which jurisdiction
attaches has priority to consider the case.'”
United States Fire Insurance Co. v. Goodyear Tire &
Rubber Co., 920 F.2d 487, 488-89 (8th Cir. 1990)
(quoting Orthmann v. Apple River Campground Inc.,
765 F.2d 119, 121 (8th Cir. 1985)). “This first-filed
rule ‘is not intended to be rigid, mechanical, or
inflexible, '… but is to be applied in a manner
best serving the interests of justice.” Id.
(quoting Orthmann, 765 F.2d at 121). “The
prevailing standard is that ‘in the absence of
compelling circumstances, '… the first-filed rule
should apply.” Id. (quoting Merrill Lynch,
Pierce, Fenner & Smith, Inc. v Haydu, 675 F.2d 1169,
1174 (11th Cir. 1982)).
Eighth Circuit has stated that a prior letter giving notice
to a party of imminent litigation could “send up red
flags that there may be compelling circumstances” to
set aside the first-filed rule. Northwest Airlines, Inc.
v. American Airlines, Inc., 989 F.2d 1002, 1007 (8th
Cir. 1993). In that case the Court of Appeals found that the
letter in question “gave no indication that a lawsuit
was imminent, or that American was doing anything more than
blowing smoke about a potential lawsuit… from which
one might infer that American's lawsuit was not truly
contemplated until after Northwest had filed its
plaintiff's original letter to defendants, dated June 20,
2016, made the imminence of filing the present case very
clear: “[U]nless you pay to [plaintiff]… prior
to June 30, 2016, the sum of $400, 000 plus interest in the
amount of… $29, 984… plus attorney fees in the
amount of… $35, 000, the appropriate civil action
will be commenced against each and every one of you,
jointly and severally, in the U.S. District Court, Eastern
District in St. Louis, Missouri[.]” (Doc. 77, Ex. 5 at
5) (emphasis added). Defendants commenced the Iowa case in
the Iowa state District Court for Polk County on June 30,
2016, the day the ultimatum presented in plaintiff's
letter was due to expire. The letter's clear language and
the date defendants' Iowa state court suit was commenced
establish that defendants' suit was anticipatory.
application of the first-filed rule, considerations of
judicial economy would not be best served by staying
proceedings in the Missouri case. “[T]he power to stay
proceedings is incidental to the power inherent in every
court to control the disposition of the causes on its docket
with economy of time and effort for itself, for counsel, and
for litigants.” Landis v. N. Am. Co., 299 U.S.
248, 254 (1936). The movant must “make out a clear case
of hardship or inequity.” Id. at 255. The
Court “weighs the potential prejudice or hardship to
the parties, as well as the interest of judicial
economy.” Boswell v. Panera Bread Co., 311
F.R.D. 515, 526 (E.D. Mo. 2015).
reasons for not staying this action are very substantial.
There are over twenty independent witnesses to this case in
the St. Louis area. (Doc. 97 at 4). Only one of the events
alleged by plaintiff Dunne occurred in Iowa; most occurred in
St. Louis. (Id. at 5). Eight of the nine defendants
did not agree to an Iowa forum-selection clause; five are
residents of Michigan, Texas, or Wisconsin, while ...