Pacific's letter on April 30, 1990. On May 16, 1990, before the 30-day period expired, Natural filed suit in this district. Natural's complaint seeks relief in four counts. Count I requests a "Declaratory Judgment That Natural Has Not Violated The Sherman Antitrust Act, 15 U.S.C. § 1 et seq., Or Any Other Antitrust Laws." Count II seeks a "Declaratory Judgment That Natural Did Not Interfere With UPR's Business or Contractual Relations." Count III asserts that Union Pacific's threatened lawsuit violates a Settlement Agreement in which Union Pacific allegedly agreed not to sue Natural. Count IV seeks reimbursement and indemnity for costs that Natural allegedly has incurred and will incur in defending a suit brought by the Colorado Interstate Gas Company.
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.
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.
Not only would hearing Tempco's case have served no useful purpose; "'the wholesome purpose of declaratory acts would be aborted by its use as an instrument of procedural fencing either to secure delay or to choose a forum.'" Id. (citations omitted). "The federal declaratory judgment is not a prize to the winner of the race to the courthouse." Id. (citations omitted). The rule set forth in Tempco applies to declaratory judgment actions designed to pre-empt not only infringement suits, but other lawsuits as well. See, e.g., CNA Financial Corp. v. Home Indemnity Co., 703 F. Supp. 759 (N.D. Ill. 1989) (indemnity bond action).
Natural's action before this court is exactly the kind of pre-emptive strike disapproved by Tempco. Having received Union Pacific's letter on April 30, 1990, Natural knew full well that Union Pacific would bring suit by May 31, 1990. Like Omega in Tempco, Union Pacific promptly filed its action upon the expiration of the 30-day waiting period required by the Tolling Agreement. Union Pacific had clearly not "continually accus[ed] [Natural], to [its] detriment, without allowing [Natural] to secure an adjudication of [its] rights by bringing suit." Tempco, at 749. Nevertheless, Natural filed this action before the 30- day period expired.
That Natural's action anticipated the suit later filed by Union Pacific is beyond question. In its April 24, 1990 letter to Natural, Union Pacific announced its intention (barring settlement) to bring suit for restraint of trade, monopolization, and wrongful interference with Resources' business and contractual relations with Colorado Interstate Gas Company. Natural's complaint seeks declaratory relief that Natural did not violate the Antitrust Act and did not interfere in Union Pacific's business relations. "As is typical in a declaratory judgment case," Natural's arguments are the converse of Union Pacific's. Inland Steel v. Van Leer, 1990 U.S. Dist. LEXIS 6565 (N.D. Ill. 1990), p. 4.
Natural insists that Tempco does not apply here because it seeks affirmative as well as declaratory relief. It is true that Count III of the complaint requests "specific performance" of a Settlement Agreement negotiated earlier between the parties. But the gist of Count III is that Union Pacific, in the Settlement Agreement, waived its right to sue Natural. This allegation merely recasts an affirmative defense to Union Pacific's lawsuit as a claim for specific performance in Natural's. Count IV seeks indemnity for costs Natural has incurred and for damages it may incur in defending Colorado Interstate Gas Company's lawsuit. This claim is premature since it seeks future potential damages and depends upon the resolution of Union Pacific's lawsuit.
Even if Count III could be regarded as an affirmative claim for relief, dismissal would nonetheless be warranted. In Associated Mills v. Regina, 675 F. Supp. 446 (N.D. Ill. 1987), for example, Associated Mills ("AMI") moved to restrain Regina from prosecuting a lawsuit brought in another district six days after AMI filed its declaratory judgment here. The court denied the motion and dismissed the case under Tempco. AMI "argued that this case is distinguishable from Tempco because in this case, AMI has requested relief other than a declaratory judgment in its three-count complaint." Associated Mills, at 448.
The court rejected AMI's argument for several reasons:
First, as the court stated in Tempco, the mere fact that a party files its declaratory judgment action first does not give it a "right" to choose a forum . . . Furthermore, AMI will be able to assert its additional claims as counterclaims in the New Jersey infringement action . . . Finally, in this Court's opinion, AMI's conduct in filing this declaratory judgment action amounted to nothing more than a pre-emptive strike. AMI should not be rewarded for winning the race to the courthouse.