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NATURAL GAS PIPELINE CO. OF AMERICA v. UNION PAC.

August 16, 1990

NATURAL GAS PIPELINE COMPANY OF AMERICA and NGPL-TRAILBLAZER, INC., Plaintiffs,
v.
UNION PACIFIC RESOURCES COMPANY, Defendant


John A. Nordberg, United States District Judge.


The opinion of the court was delivered by: NORDBERG

JOHN A. NORDBERG, UNITED STATES DISTRICT JUDGE

 Natural Gas Pipeline Company ("Natural") brought a four-count complaint against Union Pacific Resources Company, seeking declaratory relief and specific performance. Natural has filed a motion for summary judgment with the court. Union Pacific has also presented a motion for summary judgment, seeking dismissal of Natural's complaint on discretionary grounds. *fn1" That motion is granted for the reasons stated below. In declining to exercise jurisdiction for discretionary reasons, the court need not and does not reach Natural's substantive motion for summary judgment.

 FACTS

 The relevant facts, which are undisputed, are as follows. In mid-1987, Union Pacific notified Natural and NGPL-Trailblazer, a wholly-owned subsidiary of Natural, that it was about to sue Natural to recover damages for Natural's alleged tortious interference with Union Pacific's business and contractual relations with Colorado Interstate Gas Company, and for restraint of trade, monopolization, and attempted monopolization. Complaint, Exh. A.

 Because Natural wished "to avoid or delay such suit, if possible, in order to permit [Union Pacific] and [Natural] to attempt to resolve this dispute," the parties entered into a two-year Tolling Agreement and Waiver, effective July 1, 1987. Id. Under the Tolling Agreement, Natural waived any limitations defense to Union Pacific's claims which it did not have as of July 1, 1987. Reply, p. 18. Effective July 1, 1989, the Tolling Agreement was extended for an additional year. Id. During this period, the parties failed to reach settlement. The Agreement required that Union Pacific give Natural 30 days notice prior to filing suit. Brittain Aff., p. 2.

 On May 31, 1990, 30 days after Natural received written notice of Union Pacific's intention to sue, Union Pacific filed suit as promised in federal district court in Nebraska, asserting federal antitrust and tortious interference with contract claims. Union Pacific now asks that Natural's complaint before this court be dismissed. According to Union Pacific, Natural has launched a pre-emptive strike designed to deny Union Pacific the right to bring suit in its chosen forum. This, says Union Pacific, is an abuse of the Declaratory Judgment Act that need not and should not be permitted.

 DISCUSSION

 The question presented by Union Pacific's motion is when an action should be dismissed in favor of one filed later. In general, federal courts have observed the "first to file" rule, under which the first suit has priority. See, e.g., Columbia Pictures Industries v. Schneider, 435 F. Supp. 742 (S.D. N.Y. 1977). The Seventh Circuit, however, "has never adhered to a rigid 'first to file' rule." Tempco Electric Heater Corp. v. Omega Engineering, 819 F.2d 746, 750 (7th Cir. 1987) (citations omitted). The Tempco court declined to apply the rule under circumstances similar to those before this court today.

 In Tempco, Tempco Electric used an omega symbol on some of its products, which Omega Engineering believed to be an infringement of its trademark. Omega's counsel sent a letter asking Tempco to discontinue its use of the mark and threatening litigation if Tempco failed to respond within ten days. Some discussion ensued between counsel for the two companies, concluding with Tempco's refusal to discontinue using the mark. Omega sent another letter to Tempco, two weeks after the first, stating that Omega had no other alternative but to bring suit. On the day Tempco received the letter, it filed a declaratory judgment action. Omega's lawsuit followed four days later.

 Omega moved to dismiss Tempco's suit on the ground that its own action involved the same issues, facts, and parties. The district court granted the motion, and the Court of Appeals affirmed. Noting that "federal courts have discretion to decline to hear a declaratory judgment action, even though it is within their jurisdiction," the court held that "where, as here, the declaratory judgment action is filed in anticipation of an infringement action, the infringement action should proceed, even if filed four days later." Tempco at 747, 749.

 The Court of Appeals arrived at this conclusion after examining the purposes of declaratory judgment actions. They are "to clarify[] and settl[e] the legal relations at issue" and to "terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding." Id., at 749. In essence, a federal court should grant declaratory relief "to prevent one party from continually accusing the other, to his detriment, without allowing the other to secure an adjudication of his rights by bringing suit." Id. Omega had not engaged in such conduct. It "promptly filed suit to enforce its claim that Tempco had infringed its trademark. Thus, a declaratory judgment would serve no useful purpose . . ." Id.


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